Standard Life Investments says in its review of Budgets since Labour came to power in 1997 that busi...
Standard Life Investments says in its review of Budgets since Labour came to power in 1997 that business taxes are unlikely to go up this year because of existing pressures on the economy and that the really difficult decisions on taxation and government spending may be put off until after the next general election, expected by 2005.
The reason that business taxes may fall is that the government is aware of the danger of increasing the taxation pressure on an already weakened economy, and will find that borrowing more money to fund public spending will be the less painful option.
SLI says that increased borrowing is linked to the general global trend of fiscal policy becoming increasingly important as monetary tweaks become marginally less able to stimulate demand.
It is a global issue and means that the combined debt-to-GDP ratio of the US, eurozone, Japan and UK is on track to hit 4% by 2004, the same level as a decade ago and well up from 1.5% in 2001.
The problem will come when governments decide to inflate their way out of debt, with higher rates of inflation as the result, or if business investment spending recovers using new capital, SLI says.
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