CBI URGES CHANCELLOR TO SPELL OUT ROUTE TO STABILITY IN BUDGET

Plea to put UK back in the black in six years

By Alan Jones

Published: 08/03/2010

Business leaders in Scotland urged the UK Government last night to deliver a “credible” plan for balancing the country’s books within the next six years.

The CBI made a direct plea to Chancellor Alistair Darling to use his last Budget before the election to spell out plans for spending by Whitehall departments to try to deliver economic stability.

It also warned him against “damaging” tax rises because of the fragile state of the recovery.

Last night, the Conservatives described the CBI call as “a very significant moment in the election debate”.

And the Liberal Democrats claimed that it highlighted “how dangerous” the Labour government’s position had become.

The CBI wants lower spending, a reform of public services and a reversal of the planned rise in employers’ National Insurance contributions, which it says amounts to a tax on jobs.

Meanwhile, the Institute of Directors said it was vital that the next UK government made tackling the country’s budget deficit a top priority.

CBI Scotland assistant director David Lonsdale said the Budget, expected later this month, was coming at a “pivotal” moment for the economy.

He added: “Investors are jittery about sovereign debt, but are prepared to give the UK the benefit of the doubt until after the election.

“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.”

The CBI’s chief economic adviser, Ian McCafferty, added: “The government should aim to balance the books sooner than it currently plans.

“A target date of 2015-16 for restoring budget balance would send a powerful message to investors about the seriousness with which the UK is tackling the public finances. This medium-term target is much more important for credibility than the exact start date for action.

“However, in our view, fiscal balance should be achieved by curbing spending rather than increasing taxes, and cutting current rather than capital spending.

“This balance of measures is the most supportive of growth, but will mean grappling with thorny issues such as poor public sector productivity, pay and pensions.

“As well as setting out a more challenging target for the pace of reduction in public borrowing, we would also like to see full details of exactly how the fiscal austerity ahead will translate to departmental budgets.”

The Lib Dems’ Treasury spokesman, Vince Cable, said: “This submission highlights how dangerous the government’s position is.

“The country can’t afford to have political parties playing politics with the public finances. The British people and the markets have the right to know how and when each political party will tackle the deficit.”

Shadow chancellor George Osborne said: “The voices of British business are now saying what we Conservatives have been saying – earlier action on the deficit is a key to securing the recovery.

“It is a huge vindication of our approach. There is an emerging consensus that Gordon Brown’s economic approach is simply not credible. By threatening our credit rating and higher interest rates, it is threatening jobs and prosperity. That is the verdict of the businesses who are going to create the jobs and prosperity that Britons need.”