UK in 'alarming' fiscal state - IoD - News in brief

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The Institute of Directors (IoD) urged ministers to tackle "excessive" public spending, which it blamed as the long term cause of high borrowing.

The bosses' pressure group said public spending should effectively be frozen for the lifetime of two Parliaments once the current recession is over.

Tightening fiscal policy beyond 2011-12 should be focused on restricting growth in public spending rather than increasing the tax burden, the IoD said in its Budget submission.

IoD director-general Miles Templeman said: "At the present time everybody is understandably focussed on how we can stimulate demand in the economy. But we also have to consider the effect of current policies on long-term supply side performance.

"Excessive public spending is the reason why the UK entered the recession in such a poor fiscal position and so it will have to be reined back sharply.

"The alternative of higher deficits and higher taxes would be even worse for the economy, undermining growth in the long run. Our tough public spending regime would ring fence and protect key infrastructure spending and also permit a progressive reduction in corporation tax.

"We are at a fork in the road. Unless we face up to the tough long-term choices we could be stuck with big deficits for a generation. The economic consequences of the current crisis must not fall on the private sector alone."

The IoD called for cuts in corporation tax, a reversal of National Insurance increases and improvements to VAT bad debt relief.