Uks Clarke Cautioned Against Budget Tax Cuts

The warning coincides with evidence that manufacturing industrys recovery from recession is becoming more firmly entrenched, with UKs smaller factories taking on staff for the first time in a year.

In its Economic Outlook, Coopers & Lybrand, the accountancy firm, said its measure of consumer well-being has returned to positive territory for the first time since 1989.

Rosemary Radcliffe, head of economics at Coopers & Lybrand, said Kenneth Clarke, the chancellor, may decide to cut taxes out of political necessity in this months Budget. But she warned this would mean the government would have to cut public sector investment projects and risk causing unsustainably high economic growth.

 

The Bank of Englands quarterly inflation report, which is published on Wednesday, is expected to say whether it thinks interest rates will have to rise again after last weeks increase to 6 per cent.

A survey by the Confederation of British Industry published Monday shows business confidence among small and medium-sized manufacturers rose for the first time since April 1995 in the third quarter of this year.

The CBI said the manufacturers it surveyed expected both domestic and export demand to pick up over the next four months.