Embargoed until 00:01hrs

Monday 16 September 2002

Public spending and taxation are going the wrong way, says IoD

The Government's tax and spend fiscal policy came under the spotlight todayas the Institute of Directors urged the Treasury to change direction. Theadvice followed a recent survey of UK business leaders, which revealedsignificant concern towards the Government's conduct of fiscal policy. Thesame survey revealed strong support for the Bank of England's conduct ofmonetary policy.

While a positive balance of 60% of IoD members thought the Bank of England'spursuit of monetary policy was 'favourable' towards business, a negativebalance of -11% thought the Treasury's conduct of fiscal policy was'unfavourable' towards business.

Graeme Leach, Chief Economist at the IoD, said:

"Our members are clearly concerned at the rising burden of taxation, withgood reason. Between 1997 and 2006 we estimate that the tax burden will riseby almost 5% of GDP, that's 50 billion in today's price. As a result ofthis tax and spend fiscal policy the long-term GDP growth rate is likely tobe reduced by 0.25 percentage points."

The UK public spending to GDP ratio is heading towards European, notAmerican levels. Unless the current trend is broken, the UK's publicspending to GDP ratio will converge with that on the Continent.

Graeme Leach, added:

"In 2000 the public spending to GDP ratio was 9 percentage points lower inthe UK, than in the EU. The prospect of this huge gap being closed in littlemore than a decade is very worrying. It won't make the UK economy the sickman of Europe, but it will make it pretty sickly in comparison with therecent past".

Ends

13.9.02 No.120

Contact points:

David Marshall, Director of Public Affairs, tel. 020 7451 3263
mobile and out of hours: 07764 883 420

Richard Taylor, Press Officer, tel: 020 7451 3264
mobile and out of hours: 07721 734886
email: press@iod.com

Notes to Editors

1. Copies of the survey and policy paper - We're going the wrong way -tax and spend fiscal policy -are available from the Press Office.

2. The IoD is a non-political organisation with over 55,000 members,whose aim is to help directors to fulfil their leadership responsibilitiesin creating wealth for the benefit of business and society as a whole. Tothis end the IoD provides an effective voice to represent the interests ofits members to government and opinion-formers, and to bring the experienceof business leaders to bear on the conduct of public affairs.

Richard Taylor
Press Officer
Institute of Directors
116 Pall Mall
London SW1Y 5ED
* 020 7451 3264 Fax: 020 7930 8040
Mobile: 07721 734886
e-mail: press@iod.com
Web: www.iod.com