CBI slams Budget

Published:  28 April, 2009

LONDON: The Confederation of British Industry slammed the April 2009 Budget. Said Richard Lambert, the CBI's director-general: "The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. In our preliminary judgement, it does not.

"The chancellor's economic forecasts, with a rapid end to the recession and well above trend growth from 2011-2014, look optimistic. 

"The horizon for balancing the books has been extended to 2018, two years later than previously targeted. With annual government bond issue expected to exceed £200bn in the coming years and debt doubling by 2013, the Government is running too much of a risk with the willingness of investors to finance UK debt.

"If these projections are to be realised, a lot will depend on how far the Government can deliver on its plans to reduce public expenditure growth. We need to take a serious look at the size and role of the state and embark on radical reform of the way we deliver public services through greater private sector involvement and contracting out of services. We should also look at the public sector pay and pensions bill.

"This is the only realistic way of getting back to fiscal balance without having to resort to further hefty tax rises."

Business investment

Mr Lambert added that "doubling investment allowances for this year is valuable, given the vital role which business investment will need to play in the UK's economic recovery.

"Incentives to encourage the exploration and extraction of gas and oil in the North Sea are vital to making best use of the UK's natural resources, which would otherwise remain untapped. Credit insurance

"The sudden and unexpected withdrawal of trade credit insurance has been causing headaches for firms who depend on this cover to go about their day-to-day to business.

"Much of the pain could have been avoided by earlier intervention, but this targeted 'top up' scheme will provide welcome relief for some companies facing short-term working capital constraints and help restore confidence in supply chains.

Scrappage scheme

"This time-limited scheme will give the car industry a long-awaited boost at a difficult time and help support skilled jobs," said Mr Lambert.

Business taxes

"We are disappointed that the chancellor had nothing to say on next year's increase in National Insurance contributions for employers which is a tax on jobs, and he has not reversed the policy on empty properties.

"Rates on empty property have forced companies to cut staff, and can make the difference between surviving the downturn and going to the wall.

"The Government should also look at postponing the reintroduction of the 17.5% VAT rate by a month to cover the New Year sales period."

Measures to promote a low-carbon economy

"With many big energy projects, especially in renewables, being shelved or delayed because of funding problems, the provision of EIB loans will help get these schemes moving again," said Mr Lambert.

"Coal is an important part of the UK's energy mix and we welcome the agreement to support up to four carbon capture and storage (CSS) demonstration plants. Developing CCS technology is the key to reducing the impact of coal-fired power stations on the environment. Public capital spending "Cutting levels of capital spending in cash terms is short-sighted. The Government should not reduce net public investment to 1.25% of GDP from 2013-14."

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