The UK's leading business organisation, the Confederation of British Industry (CBI), has added to its voice to the chorus urging Chancellor Gordon Brown to resist the temptation to repeat the current boost to public spending. In its submission to government ahead of next month's pre-Budget report, the CBI says across-the-board tax cuts or public spending increases are hard to reverse. Longer term, it wants to see tax fall as a share of national income.
The CBI wants proposed tax credits for companies to encourage training, research and development to be implemented, rather than the revamped set of credits designed to increase work incentives for low-income families and boost pensioners' incomes which the Chancellor is thought to favour. The CBI urges a standstill on any new taxes on business, and suggests a contingency plan to cut taxes on vulnerable companies in case the economy falters.According to this year's Budget, the government ran a cyclically-adjusted current surplus equal to 1.9% of gross domestic product in 1999-2000 and a 2.1% surplus in 2000-01. The Government therefore seems to have plenty of room to run deficits before risking a breach of the "golden rule" that requires the budget to balance over the cycle. But the CBI, like the Tory Opposition, think Mr Brown has to be careful about introducing permanent new commitments in the face of major economic uncertainties.
The Tories are focusing their attacks on the integrated child credit and employment tax credit, which will replace the working families' tax credit for low-income families, and which they claim will cost another £5.2bn a year when they it is introduced in 2003. The Institute for Fiscal Studies, which has yet to publish its own estimate of the cost of the credits, has said that keeping current real growth in departmental spending going throughout the second parliamentary term, something already half-promised by Tony Blair, will cost another £5bn a year.
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