Let's focus to reduce the deficit

May 25 2010 by Sarah Green, The Journal

TODAY 40 North East business leaders will meet with CBI national policy experts in Teesside to discuss the impact of the coalition Government's early announcements on business and the North East.

The key issues will be how Government can create a sustainable path back to fiscal health, a tax system that looks for growth and doesn’t hit business, the right infrastructure, regional economic development and reform of our public services.

This week’s announcements of £6.2bn of public sector savings and the measures contained in the Queen’s speech, need to demonstrate the UK is serious about tackling the deficit and ensure that the UK has the right regulatory environment to assist in a private sector-led economic recovery. Experience suggests that the best way of bringing down a substantial deficit without damaging growth is through spending restraint rather than raising taxes.

We have been calling for a strong focus on deficit reduction to underpin the UK’s fiscal credibility and position us for a strong private sector-led recovery. It is encouraging that the Treasury has found bigger savings than first expected.

The measures announced  by the Chancellor, including departmental spending cuts and a civil service recruitment freeze, are painful but necessary steps to demonstrate the UK’s seriousness about tackling the deficit. Just as private sector firms had to take strong action to cut costs during the recession, so too must the public sector.

We believe there is still considerable scope to make even greater savings by re-engineering public service delivery. Allowing the best provider to deliver public services will increase innovation while keeping a lid on costs.

We believe that this is the best way of ensuring that frontline services can be maintained without resorting to crude cuts.

The new Government must also do everything it can to create the right conditions for the private sector to sustain and create new jobs.

That means providing certainty around taxation and energy policy, sustaining capital investment, and strengthening our skills base.

The CBI believes that we need competitive business taxes, a strong banking system, training, cultivating enterprise, prioritising energy security and the development of a low-carbon economy.

We have a new Government with a determination to get a grip on the public finances and the political will to do it. We need to see a detailed plan for achieving this in the Budget.

Sarah Green is regional director of CBI North East