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OECD Warns Gordon Brown To Curb Spending To Avoid Tax Hikes

by Jason Gorringe, Tax-News.com, London

22 January 2004

In its economic survey of the United Kingdom, released this week, the Organisation for Economic Cooperation and Development (OECD) warned that the government will need to rein in public spending in order to avoid having to increase taxes, or breaking Chancellor Gordon Brown's "golden rule" on borrowing.

In its report, the OECD suggested that there was a "need for further fiscal action" to avoid "diminishing the credibility of the fiscal framework", and warned that the UK risks breaching the 3% of GDP budget deficit limit (set out in the EU's Stability and Growth Pact) in 2005.

The Chancellor, however, hopes that faster economic growth will bring the deficit level down.

The OECD expressed strong support for planned public sector reforms, including the introduction of higher tuition fees to be funded by graduate repayments.

"Expanding higher education based on contributions from those who benefit from it rather than based on general tax revenues is the most direct way to ensure equity in education outcomes," the multilateral body observed.

However, according to reports, the UK government has rejected several of the conclusions drawn by the OECD with regard to the economic health of the country. A spokesman announced this week that:

"[Government] continues to believe that its spending plans remain fully affordable and consistent with its investment rules."

The OECD's Policy Brief on its Economic Survey of the United Kingdom can be found in the Tax-News Resources section.

 

 






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