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Tax and spend: no way to run an economy

There is no doubt that the current Government has increased the size of the public sector significantly. Data were released in the 2004 Budget, which showed that public sector spending was planned to rise to about £580 billion (over 42% of GDP) by financial year 2007/08 (FY2007), compared with spending of £320 billion (39% of GDP) in FY1997.1 And this is over a period of modest inflation. Moreover, this large spending increase has been accompanied by significant rises in both taxes and public sector borrowing. The current Chancellor’s policy, however well-intentioned, is undoubtedly one of high public spending and high taxation.

Ruth Lea - Wednesday 27th October 2004