05 March 2004
Chancellor Gordon Brown is being urged to clamp down on public sector spending because the rising tax burden it has generated is not being matched by increased productivity, according to business leaders.
The Institute of Directors, which represents company executives, says the government will have created an extra 650,000 public sector jobs by 2006, driving up the nation's tax bill. It says that if the trend continues, public sector employment will surpass 1979 levels by the end of the decade.
In its submission to the Treasury in advance of the Budget on March 17, the IoD warns that the higher spending prompted by the massive expansion in jobs has not led to significantly better public services because of the failure to boost productivity.
The IoD is now calling on Brown to link explicitly any increases in public spending to success in tackling the problem.
Against a background of lower-than-expected tax receipts and higher borrowing, it is 'strongly urging' the government to make future growth in public spending conditional on both wide-ranging reforms and affordability.
'Even a small productivity improvement in the public sector could remove the need for billions in extra taxation,' the submission says.
According to the IoD, Treasury projections show that the tax burden is due to increase by 2% of gross domestic product by 2008. The institute makes it clear that it 'does not wish to see' any further increases above those already planned.
Graeme Leach, the IoD's chief economist, said Brown had to 'get a grip' on waste in the public services.
'Large increases in public spending and taxation are pencilled in for many years to come, but these resources are not affordable and are not being used as efficiently as they could.'
The IoD's call was backed by fellow business organisation, the CBI. Director general Digby Jones said: 'The government can look forward to some better economic news this year, but it is going to need it because public finances are under real pressure and there is little sign of public sector productivity improvement.'
PFmar2004
