THE Federation of Small Businesses is urging MPs to stop playing politics with the state of the economy and instead to come up with plans for growth.
The FSB called for action as the Labour Party conference began in Liverpool. The lobby group said that the UK’s economic recovery is “flatlining” and that political parties need to work together to ensure a return to growth.
The FSB criticised Labour Shadow Chancellor Ed Balls’ call for a reversal in the 20% VAT rate. It said this would be a “wildly unrealistic” step which could cause more harm than good.
The FSB believes the UK should copy other EU countries which have cut VAT for the construction and tourist sectors for a 12-month period.
It said that reducing VAT for these industries could act as a catalyst for growth, lead to job creation and increase revenue to the Treasury, as well as widen the tax base.
The FSB also said that Labour needed more economic policies and should stop “political posturing” over the size and speed of the cuts. It said that analysis of Labour's plan to cut the deficit in its election manifesto shows that it would have made a similar level of cuts to Government spending – around £14bn to the coalition Government's £16.5bn in 2011-12.
National chairman John Walker said: “The FSB is concerned that without a more aggressive and proactive approach to promoting growth the economy will stagnate.
“While we agree with Labour that something needs to be done, we believe that a full reversal of the VAT rise is not the answer.
“The economy is too fragile to be kicked around like a political football during party conference season. We need to see all the parties working together and putting economic recovery first.
“The political sparring between parties about the cuts is not the answer and so tangible policies which deliver growth must be put in place to boost growth, jobs and UK plc.”
He called on politicians to stop talking about the level of cuts and instead focus on policies designed to boost growth, especially as the latest economic data and forecasts suggest that the economy will not grow as much as predicted this year.