Spending outlook 'bleak' says Blunkett

Speculation that the government might have to raise taxes have been heightened by Home Secretary David Blunkett's warning that things look "pretty bleak" for public spending.

Both Prime Minister Tony Blair and Chancellor Gordon Brown have indicated they face tough choices over continued levels of investment in public services.

I know things look pretty bleak on the spending front at the moment but I have always been an optimist

David Blunkett

The foot-and-mouth crisis, military action and fears of a global slow-down have all impacted on government finances.

"I know things look pretty bleak on the spending front at the moment but I have always been an optimist and a little money goes a long way," Mr Blunkett told a conference to mark Parents' Week.

He added: "There's a very big difference between being able to maintain the commitment we have made and the spending review where departments, agencies, voluntary groups and societies are increasing their demands on the government for more money.

"It's the 'more' bit that we have a problem with."

Continuing spending

Last week Mr Blair said spending would continue as planned under the current spending review which runs until 2004.

He has also said that the public could be persuaded they had to pay for good public services - which was widely taken to be a hint that taxes could go up.

And in September Mr Brown also hinted at Labour's annual conference in Brighton that he might have to increase taxes after 2004.

Mr Blunkett, speaking in central London, said: "The prime minister and the chancellor are pretty clear there's no question of reneging on the commitments we have given to 2004.

"But we have a new spending review next year adding two more years on the new rolling programme of spending."