LONDON - THE British government is expected to hit the rich to pay for tax cuts aimed at getting consumers spending again in an economic stimulus package set to be unveiled on Monday.

In a bid to counter a looming recession, finance minister Alistair Darling was widely expected to announce a future rise in income tax for top earners while cutting value added tax (Vat) to revitalise spending on goods and services.

As the country grapples with a sharp economic slowdown, mounting job losses and souring consumer sentiment, Prime Minister Gordon Brown promised to act decisively - and denied he was gambling with the public finances.

'Simply letting the recession run its course, to say there is no alternative, is not an option,' Mr Brown told delegates at the annual conference of the Confederation of British Industry (CBI), the country's biggest employers' organisation.

'That was the mistake made in the recessions of the 80s and 90s, a mistake made early on by the Japanese when they faced a banking crisis and the mistake made in the Asian crisis.

'Doing too little too late would mean more damage, more deterioration, the loss of vital businesses, a weaker economy, lower growth, eventually greater fiscal problems and in that event, higher interest rates and higher taxes.' Coordinated fiscal stimulus around the world and support for open markets and trade will help combat the global economic downturn, he said.

Mr Darling presents his pre-budget report (PBR) to parliament at 1530 GMT (11.30pm Singapore time). The PBR is an outline of his tax and spending intentions ahead of the full budget next year.

Reports based on leaks suggest Mr Darling could slash taxes by 15 to 30 billion pounds (S$68.2 billion).

Obliged to keep within European Union rules on the application of Vat, Mr Darling is expected to announce a cut from 17.5 per cent to the minimum standard rate of 15 per cent.

In Paris, French Economy Minister Christine Lagarde ruled out temporarily reducing Vat, saying it would likely boost company profits rather than solely benefit the consumer.

Mr Darling will also include plans to raise the top rate of income tax from 40 per cent to 45 per cent in 2011, media reports said.

The rise is expected to target those earning more than 150,000 pounds a year.

The current top rate of income tax is levied on earnings of more than 39,825 pounds a year. It covers about four million people.

Commentators said the expected new rate would make minimal inroads into Britain's ballooning debt, raising two or three billion pounds a year.

Robert Chote, director of the Institute of Fiscal Studies, estimated that it would be paid by about 400,000 people.

'You are not going to raise an enormous amount of revenue from this,' he said.

The London stock market surged more than five per cent in midday trade, as the government prepared to announce its tax and spending plans. The FTSE 100 index had fallen by 2.43 per cent on Friday.

David Cameron, leader of the main opposition Conservatives, has warned that public borrowing could top 100 billion pounds to pay for Mr Brown's stimulus package, and said this would lead to a 'tax bombshell' in the future.

He told the CBI: 'The real story of this PBR will be our enormous deficit and out-of-control public finances.

'They might be talking about tax giveaways but everyone knows that they're throwing money at us now to take it away at a later date.

'This is the real story of today's PBR. Higher debts in the future. Higher taxes just as the economy starts to grow again. More of the same policies that got us into this mess.' -- AFP