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The Economy and The Budget

John Hawksworth Head of Macroeconomics PricewaterhouseCoopers feels that slower public spending growth may not avoid future tax rises
The Chancellor faced two major strategic decisions in his Budget. First he had to decide whether he needed to raise taxes immediately to ensure that public borrowing over the next two years will remain low enough to meet his Golden Rule of borrowing only to invest on average over the current economic cycle. Second the Chancellor had to decide how much further he could allow total public spending to rise in 2006/7 and 2007/8. Before looking at these issues however we first review the Treasury's economic growth forecasts.
Treasury growth forecasts look achievable for 2004 but growth could slow in 2005

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