CBI Urges 'Credible' UK Budget Plan
Tuesday, March 9, 2010
The Confederation of British Industry (CBI) is calling on the UK
government to set out more aggressive plans to deal with the budget
deficit through comprehensive reductions in spending rather than
increases in taxation on business.
In a letter to Chancellor Alistair Darling, Richard Lambert, the
CBI’s Director-General, spells out two critical objectives for the
budget: boosting the UK’s fiscal credibility and fostering economic
The CBI says that delivering a detailed and credible plan for balancing
the books by 2015-16, two years earlier than planned, is the key to
addressing concerns about the UK’s public finances and its 'AAA' debt
The Confederation argues that an earlier date for budget balance
should be achieved through a combination of lower overall spending and
public service reform, rather than "resorting to damaging tax rises at
time when the economy is still fragile."
The budget must also include measures to nurture economic growth by
supporting businesses and entrepreneurs, the CBI says.
“This budget comes at a pivotal moment for the UK economy. Investors
are clearly jittery about sovereign debt, but are prepared to give the
UK the benefit of the doubt until after the election," said Lambert.
“The UK’s deficit, though worryingly large, is still manageable, but
the government must act now to set out a convincing, credible pathway
for balancing the books. It is critical that this budget provides
credibility and direction on the public finances, and creates the right
conditions for businesses to drive economic growth," he added.
Ian McCafferty, the CBI’s Chief Economic Adviser, believes that a
target date of 2015-16 for balancing the UK government's books "would
send a powerful message to investors about the seriousness with which
the UK is tackling the public finances."
“However, in our view, fiscal balance should be achieved by curbing
spending rather than increasing taxes, and cutting current rather than
capital spending," he cautions. "The budget should do whatever is
necessary and possible to maintain and strengthen this country’s
reputation as an attractive place for investment."
In this context, McCafferty said that the planned 1% rise in
employer National Insurance Contributions from this April "is
particularly ill-judged" and should be reversed.