Use Budget to boost confidence in UK finances

Mar 9 2010 by Sarah Green, The Journal

THE CBI is urging the Government to use its last Budget before the election to set out more details of spending plans for Government departments in order to boost confidence in the UK's public finances and provide economic stability.

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.

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, including reversing the planned rise in employers’ National Insurance contributions, which amounts to a tax on jobs.

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.

The UK’s deficit, though worryingly large, is still manageable, but the Government must act now to set out a 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.

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.

With the public sector about to be squeezed, it will be up to business to take up the slack and deliver the growth needed to get the economy back on track.

The Budget should do whatever is necessary and possible to maintain and strengthen this country’s reputation as an attractive place for investment. The planned rise in National Insurance contributions is particularly ill-judged. It is a direct tax on jobs and should be reversed.

Sarah Green is regional director of CBI North East