CBI warns Chancellor not to give away too much
Chancellor Alistair Darling has been warned by the CBI to avoid another big give-away “stimulus” in his Budget on April 22 and urged to reverse recent Government decisions that are adding to business costs and threatening jobs.
The CBI also called on the Government to press ahead with public sector building programmes through the recession and bring in a temporary “scrappage” scheme to encourage households and businesses to by new, low carbon cars and domestic appliances.
In its formal Budget plea, prepared after detailed talks with Treasury officials, the employers’ organisation specifically asked the Chancellor to delay the planned half-point increase in employers’ National Insurance contributions to 13.3 per cent in 2011, when unemployment is still likely to be high.
It also calls for rates relief on empty property to be restored to the pre-2008 position, removing the tax incentive for companies to demolish buildings which they cannot use during the recession.
The CBI also urged the Chancellor to freeze the business rates for two years. This would save businesses a five per cent increase due this April – based on the Retail Prices index last September, but remove their entitlement to a cut next year from any fall in the RPI.
John Cridland, the CBI’s deputy director general, said he accepted that a cautious Budget to restoring business confidence “is not the most obvious thing... in advance of a general election”.
Yet he added he believes that with the exception of the Blair Government’s two per cent increase in employers’ national insurance contributions, the CBI has a good track record in influencing Governments not to increase taxes on business. “This is the year when we think we can make a difference,” he said. “The outlook for the public finances is already alarming.
“A further significant fiscal stimulus is unaffordable and would lead to businesses and households retrenching in fear of higher tax bills in the future.
“Instead, the Chancellor needs to let the stimulus already in the pipeline take effect and deliver a clear plan for restoring public finances to health.”
The CBI estimates that the Budget could be brought back broadly into balance by the 2015/2016 tax year without big tax increases.
But this would require a squeeze on public sector spending – other than investment, which the CBI supports strongly, and inevitable interest payments.
The squeeze would have to involve a “robust approach” to public sector pay and pensions, Mr Cridland insisted.
There would also have to be more competition and contracting out in the provision of services, freeing up police officers and teachers, for example, from back office functions.
“We need to cut our cloth to reflect these constrained economic times and the public sector will need to share some of this pain, too To maximise the potential savings, the Government needs to commit to a level playing field between public, private and voluntary providers of services.”
Meantime, the CBI calls for measure to combat unemployment and prevent newly unemployed people from slipping into long-term unemployment.
One proposal is for a temporary subsidy for graduates undertaking courses for masters’ degrees, particularly in science, technology and maths. That should minimise unemployment among graduates and boost Britain’s skills base.
