The Institute of Directors argues that UK economic policy now stands at a “fork in the road” and as a result we now face a clear choice. Continue along the current path and the UK economy will mirror that of other EU economies with large governments.

Alternatively, pursue global best practice and aim to reduce the size of the state towards the levels seen in the US, Australia, Ireland and Switzerland, where public spending is between 34 per cent and 37 per cent of gross domestic product.

There is nothing inevitable about a rising burden of public spending and taxation. Other countries have achieved huge reductions in the spending to GDP ratio. Since 1993 public spending in Spain has fallen by 11 per cent of GDP and in Ireland the fall was 10 per cent of GDP over the same period.

The IoD is calling for:

● Total public spending to be constrained to 1.5 per cent per annum real growth over the period 2008-2009 to 2010-2011.

● The introduction of a third fiscal rule, namely a commitment, over the course of the economic cycle, to reduce net taxes and social security costs as a percentage of GDP.

● The introduction of regional comprehensive spending reviews. The huge regional imbalances in public spending must be addressed – the state share ranges from 31-65 per cent of GDP across the UK.

● A reduction in the standard rate of corporation tax from 30 per cent to 28 per cent. Latest figures show 21 OECD countries have a lower rate of corporation tax than the UK.

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