Central government spending on running costs such as salaries rose by 10% in the first five months of the year to £165bn, compared with a budgeted increase of just 6.5%.
The CBI expects public borrowing to react £32.5bn by 2004/2005 some £8bn more than the Treasury forecast at the time of the last Budget.
CBI head of economic analysis, Doug Godden, said: ‘The government has boxed itself in by committing to such large increases in public spending. There is growing concern in the business community that the chancellor will have to take unpalatable action at some point in future.’
He added: ‘Economic growth has been more sluggish than originally hoped and the public finances are in increasingly poor shape. Over the short-term we should be able to get through by allowing borrowing to rise but that cannot go on forever.’
Godden predicted more tax rises or less public spending than planned unless there is a an unexpected improvement in the financial situation over the next three years.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements