BusinessCompany NewsBrown pledges to spend on public services

Brown pledges to spend on public services

Chancellor Gordon Brown has promised extra cash for public services in the next spending round.

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He made the pledge at the Labour Party Conference in Bournemouth where he also justified raising national insurance contributions to pay for extra NHS spending as the government ‘being open and honest about taxation’.

And in his keynote speech yesterday he pledged: ‘We will be able in the next spending round to deliver new resources to our front line public services.

‘The next spending round will not only lock in the higher spending we have been delivering – meeting our commitments to all the public services from policing to transport, meeting our fiscal rules – but do more: with further increases in spending and investment for our priorities in the years to come.’

After this speech Brown’s chief economic adviser Ed Balls put flesh on the bones revealing that the government is planning to raise real spending, excluding health, by around 2.5% a year through to 2008.

He said that ‘billions of pounds’ more may come from a planned shake-up of Whitehall departments, that could see up to 20,000 civil servants moving to the regions from London.

But he refused to comment on whether the government will downgrade its 2003 growth forecast in November’s pre-Budget report and dismissed speculation that the Treasury is looking to raise the trend rate of growth.

Balls sought to dampen down on growing expectations that the Treasury is embarking on a very tight spending round ahead of next summer’s Comprehensive Spending Review, in light of the deterioration in the public finances.

He echoed Brown’s speech when he said the ‘dividing line’ at the next election will be Labour’s planned spending increases versus the Conservatives cost-cutting dogma.

By 2008, Balls said public spending will be higher in nominal and real terms, but added that the government will not break its two fiscal rules of balancing the budget over the economic cycle and keeping net debt as a percentage of GDP below 40%.

Currently, debt to GDP stands at 34%, having been beyond 40% before Brown began a vigorous debt reduction campaign.

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