The axe is yet to fall on public spending, says IoD

5 December 2005

Responding to the Pre-Budget Report the Institute of Directors said the Chancellor is yet to bring public spending under control. The IoD called on the Government to restrain public spending growth to 1.5% per annum in the next Comprehensive Spending Review. It is not sufficient for public spending to plateau off as a proportion of GDP, it needs to fall, the IoD said.

Miles Templeman, Director General of the IoD, said:

"GDP growth has been revised down in the short term but it appears to have been revised up thereafter. Once again, if the growth does not materialise taxes will have to rise unless the Chancellor takes an axe to public spending. The Chancellor can't guarantee economic growth but he can cut public spending in order to keep the public finances under control."

Whilst awaiting the detail of the Chancellor's proposals the IoD welcomed a number of initiatives in the Pre Budget Report:

• The replacement of the zero rate of corporation tax by increased capital allowances for small business was welcome. This will reduce differences in the taxation of small business, depending on how they are organised.
• The IoD welcomed the freeze on road fuel duty.
• Whilst waiting to see words put into action the IoD was cautiously optimistic about the Chancellor's new risk-based approach to regulation.
• The IoD welcomed the plan to roll out the National Employer Training Programme from 2006. This will provide subsidised training to individuals to secure their first level 2 qualification. It will be particularly useful for small firms.