The OECD yesterday became the latest institution to criticise UK Chancellor of the Exchequer Mr Gordon Brown's public spending as excessive and not necessarily likely to yield improved services.

In a report that expands on its November 2003 overview of all member countries, the OECD said a slowing in the build-up in public expenditure may improve services by stemming the flood of cash that departments often do not put to good use. "The jury is still out on whether the massive spending increases will fully pay off in terms of improved service," the Paris-based Organisation for Economic Co-operation and Development said in a report.

The report recommended "firm cost-control in non-priority spending areas", adding that "much of the required adjustment could be achieved by slowing the rate of increase in public expenditure". The OECD report also said that for the government to meet its fiscal rules, it may have to raise taxes or cut public spending. Otherwise a "sizeable structural deficit will persist", the report said.

UK public finances have swung into a deficit of more than £37 billion in the current fiscal year - or more than 3 per cent of gross domestic product - as a result of sharp increases in public spending and stagnating tax revenue.