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 growth.
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 rating.
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.