The Confederation of British Industry (CBI) has today released what it is calling a “blueprint for balancing budget and supporting economic growth” outlining its recommendations for Alistair Darling’s impending Pre-Budget Report.
The business support body says government needs to cut spending by £120bn in order to balance the books by 2015-16. This is two years earlier than government has declared it is aiming for but the CBI feels the earlier deadline is necessary for the UK’s recovery. £50bn will need to be found between now and 2013 because of slow economic recovery and a further £70bn after, the group says.
Its plan involves bringing the public finances back into balance, a radical re-design of the way public services are delivered, and introducing a range of low-cost measures to position the economy for recovery.
“We are facing the biggest peacetime deficit in our history, and it is not simply going to disappear with the economic recovery,” says CBI deputy director general John Cridland. “That is why we need a fully credible plan to convince financial markets and taxpayers alike that the public finances will be restored to health.”
The necessary savings, he said, “cannot be achieved by tinkering at the edges, but will require radical public sector reform…with strong political will.”
Cridland warned against raising taxes and cutting capital investment. “The only sensible option is to try to do more with less,” he said.
The CBI is proposing the creation of a Fiscal Policy Committee, to scrutinise government’s public finances and says skills from the private sector in change management, process re-engineering, culture change and communication need to be utilized in reforming the delivery of public services.
Public services need to be more productive and more efficient in the way that the private sector strives for, says CBI. This includes cutting out duplicate services, managing employees’ working time and pay better, outsourcing backroom functions to the private sector, and utilizing the best available technology.
“Government must decide what it can afford to deliver, and focus on must-haves, rather than nice-to-haves,” said Cridland.
In terms of support for the economic recovery, CBI suggest short term measures including upgrading the research and development (R&D) tax credit scheme; de-regulating small mergers; and reconsidering tax rises in areas such as in National Insurance, landfill tax, Air Passenger duty and the timing of the VAT rise.
“With firms still facing challenging conditions and credit still not flowing freely around the economy, there are a number of relatively low-cost measures the government could adopt to help,” summarized Cridland.
“Delaying some business tax rises that are in the pipeline and making some sensible regulatory changes would give businesses the headroom to recover, so they can help drive economic growth and support jobs.”
The CBI outlined all of its proposals for inclusion in the Pre-Budget report in a letter addressed to the Chancellor. You can read that by clicking here.