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3 August 2003

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Public spending and tax 'going the wrong way' say local Directors

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Local company directors have called on the government to change course with its plans for spending and taxation.

A national survey of members of the Institute of Directors (IoD) showed that an overwhelming majority support the Bank of England's handling of monetary policy but a majority also think the Treasury's taxation and spending plans will damage businesses.

Stephanie Smye, chairman of the IoD's Eastern Branch which represents more than 1,000 company directors throughout Cambridgeshire, said:

"The government's tax and spend fiscal policy is leading to a rising burden of taxation. IoD economists estimate that the tax burden will have risen by almost 5 per cent of GDP over the ten years to 2006 - that's 50 billion in today's prices.

"As a result of this, the long-term GDP growth rate is likely to be reduced by 0.25 per cent. Lower growth means riskier business conditions, less investment and fewer jobs.

"In 2000 the proportion of the UK's GDP which was taken by the government was significantly lower in the UK than the average for the EU. Now it is heading towards European levels.

"The prospect of this gap being closed is very worrying. It may not make the UK economy the sick man of Europe but it will make it pretty sickly in comparison with the recent past. The trend is heading in the wrong direction and the government needs to take action to turn things around."

October 2002




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