The Small Firms Association has called on the Government to take action on public spending. In its annual winter economic statement, the SFA has claimed there is an "urgent need" for the Government to assert its position on public spending.

The association has also called for an early reduction in interest rates and for the Government to tackle the problem of long-term unemployment and the black economy.

It is calling for new measures to ensure that social welfare payments are conditional on no reasonable work or training offers being available.

According to the SFA, there is now "real danger" that the Government has lost control of public spending and expenditure will be pushed beyond what is sustainable or compatible with tax reductions.

The association pointed out that real current expenditure in 1997 is expected to grow by 7.6 per cent in the Department of Finance's latest estimates, which is an over-run of 2.5 times the rate of inflation.

Mr Pat Delaney, assistant director at the SFA, said the Government has already committed itself to spending £300 million to deal with hepatitis C, army deafness claims, and P & T pensions, as well as a small increase in reserves.

He added that there are already significant inflationary pressures within the economy including personal credit, house prices, fixed asset prices, skills shortages and labour supply.

"The Government has only met its single currency obligations because of the buoyancy of the economy and not through any spending constraint," Mr Delaney added.

On interest rates, the SFA is calling for the Central Bank to take a less cautious approach with its first reductions. It points out that the increase in rates earlier this year added to cost pressures and affected growth of many firms.

The burden being borne by business is having a "crippling effect" across a number of key areas, Mr Delaney claimed.

According to the SFA, employment growth is also being hampered by a skills gap and the continued failure to reduce the ranks of the long-term unemployed. It has estimated that at any one time there are thousands of jobs available which cannot be filled.

"More must be done the reassure the long-term unemployed that even moderately paid jobs are an investment in their future," Mr Delaney said. He added that the Government must ensure that take-home pay is higher than social welfare payments by further reducing the tax wedge.