No more fiscal stimulus – CBI

THE Confederation of British Industry has urged the Government to rule out further fiscal packages ahead of next month’s Budget.

The CBI wants the Chancellor to deliver a confidence-building Budget with an emphasis on supporting jobs, investment and competitiveness through the recession and beyond. 

The business group is also urging him to come up with a clear and credible strategy to get the public finances back under control.

Ian McCafferty, the CBI’s chief economic advisor, said: “There is no room for further fiscal demand stimulus. If automatic stabilisers are taken into account, there is already a very significant amount of fiscal stimulus in place, of over 3% of GDP.

“The Bank of England is now providing further monetary stimulus through the policy of quantitative easing and, on top of the sharp interest rate cuts of recent months, this is a preferable route to stimulate activity.”

Instead, the CBI is proposing a targeted package of measures to under-pin confidence, boost competitiveness and improve the skills base.

It wants the Government to:

• Delay the planned rise in 2011 of employer National Insurance Contributions from 12.8% to 13.3%.
• Restore empty property rates relief to its pre-2008 position.
• Freeze business rates for two years to iron out the impact of peaks and troughs in RPI inflation.
• Introduce a temporary scrappage scheme to encourage consumers and businesses to replace old cars, vans, fridges and washing machines with the latest efficient models.
• Step up support for the newly-unemployed by improving services offered through Jobcentre Plus.
• Push ahead with public sector building programmes.

Deputy director general John Cridland said: “The public finances have been battered by the cost of rising unemployment and lower tax receipts during the recession. With economic activity expected to contract by 3.3% and unemployment set to reach nearly three million this year, the outlook for the public finances is already alarming.

“Against this backdrop, 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 considerable stimulus already in the pipeline take effect and deliver a clear and credible plan for restoring the public finances to health.”