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Cut Britain's tax burden, IoD tells Brown

LONDON: Top British business organisation the Institute of Directors urged the government on Monday to cut the tax burden and take no chances with public finances despite the current hefty surplus.

Presenting its pitch to Chancellor of the Exchequer Gordon Brown ahead of his March 2000 budget, the IoD said the government should adopt a "third rule" for fiscal policy, committing itself to reduce the tax burden as a proportion of gross domestic product (GDP).

That would be in addition to Brown's current rule of running a balanced current budget over the economic cycle and borrowing only to cover public investment.

When Labour took power the tax burden stood at 35.3 percent of GDP for 1996/97. It then rose, according to the Treasury's own figures, to 37.4 percent in 1998/99 but is projected to fall to 37.0 in the current year and to 36.8 in 2000/01.

Opposition Conservatives have made great play out of the fact that the burden has risen, saying Prime Minister Tony Blair has broken his promise not to raise taxes and that they will be higher at the end of the current parliament that when he took power.

The government counters that it had to take tough measures to rein in public debt but that now the tax burden is set to fall. However, the IoD pointed to the fact that the burden was forecast to pick up again in 2001/02, with the government itself projecting a rise to 37.2 percent in that fiscal year.

"The government must not risk any more increases in spending," said Ruth Lea, head of the IoD's policy unit.

"We are calling for an overall reduction of the tax burden as a proportion of GDP which if anything has pushed up since Labour came to power," she said. In his November pre-budget report, Brown presented much improved forecasts for the public coffers, changing his figures for the current fiscal year alone from a three billion pound deficit to a 3.5 billion pounds ($5.75 billion) surplus. Estimates for later years were also revised sharply upwards.

Brown has repeatedly pledged he would maintain an iron discipline on public spending for the coming few years, denying accusations from the opposition Conservatives that he was using healthier public finances to build up a warchest for increased spending before the election, due by 2002.

A "VOUCHER" FOR EDUCATION AND HEALTHCARE

The IoD also said Britain should stand firm against European tax harmonisation and simplify its own fiscal system.

It said it recognised the need for extra funding for education and health but argued Britain should rely more on the private sector to improve standards and efficiency.

It proposed the adoption of a "voucher scheme" funded by the taxpayer which would allow people to chose between free public facilities or, if they opt for private services, get a credit and top up the payment with their own contribution.

However, the IoD admitted this would require a "rationalisation" of the national health system which would provide only "basic" care.-Reuters