IoD urges Treasury to rethink tax policies

Link: IoD defends UK corporate controls

While offering strong support for the Bank of England’s monetary policy, the IoD said the Treasury needed to change the direction of its fiscal policy.

A negative balance of IoD members thought the Treasury’s conduct of fiscal policy was ‘unfavourable’ towards business.

The IoD said that between 1997 and 2006 it estimated the tax burden to rise by almost 5% of GDP ‘or £50bn in today’s prices’. It said UK public spending to GDP ratio was heading towards European, not American levels.

‘As a result of this tax and spend fiscal policy the long-term GDP growth rate is likely to be reduced by 0.25 percentage points,’ said Graeme Leach, chief economist at the IoD.

He added: ‘In 2000 the public spending to GDP ratio was 9 percentage points lower in the UK, than in the EU. The prospect of this huge gap being closed in little more than a decade is very worrying. It won’t make the UK economy the sick man of Europe, but it will make it pretty sickly in comparison with the recent past.’

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