CBI urges Brown to scale down public spending

CBI urges Brown to scale down public spending

	Published : Mon, 07 Nov 2005 13:35 By : James Rowe Print this Story

The Confederation of British Industry (CBI) has asked the Chancellor of the Exchequer Gordon Brown to restrict government spending, or else the government runs the risk of having a financial deficit which can be offset only by higher taxes.

The employers' group said that such tax increases would only prove counter-productive to growth and are unwarranted at a time when the economy is slowing.

CBI warned that unless Brown acts urgently, Britain will run the risk of having a 10 billion-pounds annual deficit. It said that the government had only two years before the structural budget deficit could be brought under control. It has also asked the government to reduce considerably the tax burden on businesses, which has cost this sector an additional £50 billion since Labour came to power in 1997.

CBI also said that tax avoidance measures would turn out to be anti-business. The government was also warned against introducing compulsory employer pensions, which it felt were only “counter-productive.”

"Whilst the Chancellor can shift the fiscal goalposts and delay the Comprehensive Spending Review, tackling the structural deficit can only be deferred, not ducked forever” averred the CBI Deputy Director-General John Cridland.

CBI suggested Mr Brown to prune the public spending growth rate from 12 per cent to 10 per cent in the next two years. This would reduce the planned increase in total spending from the current £61.4 billion to £51.4 billion, and save the government £10 billion, it opined. The government could save by not hiking the pay in public sector, curbing absenteeism and by dealing with frauds in the benefits bill.

The government was, however, urged to continue its long-term spending plans in social sector, science and technology, and for strengthening infrastructure in transportation sector.

The CBI told the government, in no uncertain terms, that it would review its future relationship with the government by the measures it would take now to control deficit.

The Treasury has tried to assuage fears of the general public by stating that the spending plans are affordable and that they have been taken into account while drafting the Budget report. Mr Brown is expected to publish his forecast in the Pre Budget Report later this month.

Earlier, Mr. Brown had rejected suggestions of the IMF to tackle government borrowing. He also didn’t heed the advice made by the Institute of Fiscal Studies, a London-based research group, which suggested that taxes should be raised by 12 billion pounds by 2006 to keep the deficit in check.