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7 March 2001

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Spending plans 'vulnerable to economic downturn'

Chancellor Gordon Brown's plans to spend an extra 43 billion on public services over the next three years are vulnerable to the threat of economic downturn and may not produce the desired results, says the Eastern Branch of the Institute of Directors (IoD).

Eastern Branch treasurer Alan Blake also suggests the spending spree has been funded by large tax increases.

"The Chancellor's generous spending projections are risky because they are based on the expectation of continuing economic growth," said Mr Blake. "They are based on the hope that economic growth will continue for an unprecedented 12 years and the situation could deteriorate rapidly if there was a significant downturn."

Mr Blake added "There is no guarantee that the cash injections will deliver the goods.

"Merely pouring an extra 12 billion into education and 13 billion into health services without long overdue and significant structural and managerial changes is most unlikely to provide the services that people are increasingly demanding."

However, he welcomed plans to give extra money to new services which help small businesses, increased spending on transport, extra flexibility for regional development agencies and greater emphasis on literacy and numeracy skills.

The IoD calculates that the amount of tax taken by the government as a proportion of gross domestic product (GDP) has risen from 35.3 per cent in the financial year 1996/97 to nearly 37 per cent this year - or nearly 38 per cent if the Working Family Tax Credit is taken into consideration.

July 2000




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