What's holding the British Government back? I suspect it's a combination of economic and political motivations.
Economically, there's the argument that America's experiencing things worse, so Britain doesn't need to act quite as decisively. If Brown believes this, then he's going against the wisdom of commentators such as Anatole Kaletsky, who recently wrote that:
"At the beginning of this year I wrote that if the financial markets did not resolve the credit crisis by February, the governments of the world would have to come up with a Plan B. Central banks would slash interest rates or governments would cut taxes and offer guarantees or regulators would fudge accounting rules to ensure that banks could keep lending .... My hunch is that a combination of monetary and fiscal easing, along with some regulatory changes – the political Plan B – will lessen the credit crisis and prevent a world recession."
And he's also ignoring the sound argument (persuasively expressed by Prem Sikka) that a tax relief package could aid those low income earners who will be most affected by the credit crunch.
But it may be grim knowledge, rather than ignorance, on Brown's part; knowledge that he's taxed-and-spent the UK economy to the point of no return. However beneficial US-style relief packages may be for the UK economy, there's just not enough fiscal slack for them to be introduced. As the Institute for Fiscal Studies revealed today, taxes will actually have to rise by £8 billion to accomodate Brown's spending and borrowing plans for the next five years.
As for the political reasons, I suspect Brown doesn't want to get too involved for fear of courting public discontent. So far, the official narrative has been that all Britain's economic woes are down to global forces that the imprudent Americans set into motion. If Brown introduces policies which don't do anything - or, even worse, fail - then it'll become much easier for the public to pin the blame on him.
Relatedly, Brown might be banking on the credit crunch eventually blowing out. As I wrote in a Coffee House post a few days ago:
"The decision not to call a general election last October means that Britain will most-likely have ridden out the worst of the credit crunch by the time the next election does come around. Then Brown can – and almost certainly will – claim credit for both the light at the end of the tunnel and for getting Britain through the tunnel in the first place."
The strategy's risky. In what the Spectator's Fraser Nelson has already referred to as a "landmark article", Kaletsky suggests voters will turn on Brown if he doesn't act:
“Financial upheavals so powerful that they topple the whole machinery of government seem to strike Britain about every 15 years - Black Wednesday in 1992, the Winter of Discontent in 1979, the 1967 and 1949 devaluations, the 1933 collapse of the Gold Standard. So far, no government has survived one of these earthquakes. I thought at first that Mr Brown, with the help of the Bank of England, might defy the odds and pass the test this time. But yesterday's statement [about Northern Rock] made clear that I was wrong. Like Major before him, Mr Brown is not being swept out of power by the tidal wave of events but by his own inability to take timely, sensible decisions in response to them.”
All-in-all, if things get worse for the economy from here on in, then we might look back and say "it was the dithering what did it".
UPDATE: The US Federal Reserve has cut interest rates by a further 50 basis points.