The Small Firms Association has called for interest rate reductions as a top priority. In its annual summer economic statement, the SFA has also called for the Government to show resolve on public spending and public sector pay.

The major problem for the economy, according to the SFA, is that the Government has again lost control of public spending.

According to the SFA, is "imperative" that the Government withstands any pressure for pay increases above those agreed in Partnership 2000.

It also pointed out that a 6 per cent rise in current Government spending must give rise to serious concern. Allowing expenditure to rise in multiples of inflation puts the economy in severe jeopardy if economic activity starts to slow for any reason, it notes.

The statement also notes that there are already significant inflationary pressures in the economy such as increases in personal credit, house prices, fixed asset prices, skills shortages and labour supply.

The SFA states it is concerned that there is a real danger that the progress achieved through national programmes will be undone by the continued failure to manage and control public spending.

The association is also calling for the Central Bank to take a less cautious approach on interest rate cuts and implement an immediate 1 percentage point cut for business customers.

According to the statement small businesses face substantial costs from the introduction of monetary union but still face interest rates over 2 percentage points above those of competitors.

It claims to support the Central Bank's concern about inflation but adds that this pressure would not apply if the reduction were confined to business customers. However, it is unclear how this would be managed as this is likely to be a decision for the retail banks.

The association also insists that urgent action is required to fill the 10,000 jobs which are still vacant. It is calling for the introduction of measures which ensure that social welfare payments are conditional on no reasonable work or training offers being available.

It is also calling on the Government to make progress on tax reform and so increase the real return to work.

"The Government must display a more earnest approach to creating an environment where people will take up legitimate work and this can only be done by making take home pay higher than welfare payments and by enforcing measures to deal with the black economy."