Industry gives £43bn spending review a reserved welcome

Chancellor Gordon Brown’s £43bn increase in public spending, unveiled in Tuesday’s Comprehensive Spending Review, was broadly welcomed by industry, although concerns remain over the prospects for inflation and higher taxes for business. Planned increases infunding for education, science, transport and regional development could lift the country’s productive capacity, said the Engineering Employers Federation chief economist […]

Chancellor Gordon Brown’s £43bn increase in public spending, unveiled in Tuesday’s Comprehensive Spending Review, was broadly welcomed by industry, although concerns remain over the prospects for inflation and higher taxes for business.

Planned increases infunding for education, science, transport and regional development could lift the country’s productive capacity, said the Engineering Employers Federation chief economist Stephen Radley. But he warned that the overall effect might not be so positive: `We remain concerned about the macro-economic effects of large increases in spending and the potential they have to push up interest rates or taxation.’

Business leaders said they wanted to see details of how the extra money would be spent before passing judgement on the review. Confederation of British Industry director general Digby Jones said: `The challenge will now be to ensure the funds allocated are spent wisely and targeted where they can be most effective. This country’s global competitiveness depends on getting investment in these areas right.’

Extra transport spending was widely welcomed. The CBI has called for a 10-year investment plan costing £180bn, while the British Chambers of Commerce estimates road congestion is costs business £20bn per year.

But BCC deputy director general Dr Ian Peters warned that increasing government spending faster than the rate of growth in the wider economy could fuel inflation. `The chancellor must lock up his spending totals for the next three years and throw away the key,’ he said.

Some observers are concerned that the money for increased spending will rely on growth increasing at the chancellor’s forecasted levels. If it fails to do so, one possible result could be higher taxation.

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