Spending and more tax cuts main priority

BOTH employers and trade unions have learned from the experience of the Programme for Competitiveness and Work and the latest NESC report shows that they want the Government to commit to specific tax reductions as part of any new plan. Under the PCW, a large part of the fruits of growth went to higher public spending, leaving modest amounts for tax reductions each year. The new plan wants a tighter control on spending and more tax cuts.

The National Economic and Social Council is important as the longest standing body including representatives of all the social partners. Its reports have played a key role in the negotiation of previous national programmes and the publication of its "Strategy into the 21st century" should signal the start of real talks this time.

Its recommendations could be summed up as "more of the same only better". Policy should continue to be aimed at controlling the public finances, reducing the level of debt to national out put. It believes that a centralised agreement is the best way to get appropriate wage settlements.

The call for a specific percentage of national output to be devoted to tax reduction each year is an important one. A key part of the NESC's conclusions is that the aim of cutting taxes, increasing employment and promoting "social inclusion" must be made priorities. They should not be treated as "residuals, when existing or `no policy change' expenditure bills are met", the conclusions say.

The report also deals with EMU membership and says that the best way to deal with the risk of a sharp fall in sterling if Britain remains outside is to have a regular review mechanism of the whole programme, do everything necessary to boost competitiveness.

However, this leaves open the question of how industry and employees would agree the response to a sterling fall and whether the adjustment would fall on wages or on employment levels.