CBI: public spending must not exceed tax take

29 Oct 14

The next government should set a fiscal rule to ensure that total public spending does not exceed tax revenue once the existing deficit is closed, the CBI has said.

In a report looking at the future for public services in the next Parliament, the business group said politicians of all parties had yet to grasp the pace and scale of change required in public service spending if the UK was to live within its means.

Today’s Our future public services: a challenge for us all report argued that the next government should pledge to match spending to revenue over an economic cycle. This would keep the size of the state at 38% of gross domestic product, which is the level anticipated once the deficit is closed in 2017/18

Deputy director general Katja Hall said such a rule would create an incentive to implement long-term reforms that could unlock savings, and a cross-party commission should be established to develop such plans.

She added that all political parties needed to recognise that serious structural changes were required to prevent public services suffering inevitable decline through a thousand cuts.

‘It will take bold decisions like integrating health and social care to help address the pressures that an ageing population places on our public services, especially the NHS.

‘Managing public spending within acceptable limits will demand re-shaping of public services to better meet people’s needs, including increasing the number of services available online.’

Other long-term changes that would be incentivised by such a limit included a gradual switch away from high levels of welfare spending to policies that tackle underlying problems through early intervention, the CBI said.

It would also catalyse the physical co-location of more services and government agencies in local areas, which would in turn lead to greater joining-up of local provision.

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