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CBI: Treasury needs to save extra 120bn

THE Treasury&rsquo;s plans to balance the deficit by 2017-18 are not urgent enough and do not have the necessary credibility to underpin the government&rsquo;s management of the public finances, the Confederation of British Industry will say today.<br /><br />In a letter to chancellor Alistair Darling, CBI director-general Richard Lambert urges the Treasury to return to the Pre-Budget Report 2008 target of balancing the deficit by 2015-16.<br /><br />But achieving budget balance by 2015-16 would require an extra &pound;120bn of savings during this period, of which only a small amount would be achieved automatically through economic growth.<br /><br />The CBI outlined five areas in which savings totalling an estimated &pound;136bn could be made by reforming the public sector to make it more productive. The business lobby estimates that redesigning the delivery of public services would yield &pound;63bn of savings between now and 2015-16 and outsourcing non-core activities would provide &pound;30bn of savings.<br /><br />The CBI recognised concerns that fiscal tightening now could tip the economy back into recession, but stressed that &ldquo;much of the tightening comes from 2012 onwards when we think the economy will be in a better state and growing at around 2.5-3 per cent per year&rdquo;.<br /><br />Shadow chief secretary to the Treasury, Philip Hammond, said: &ldquo;This report is a shocking indictment of the government&rsquo;s management of the public finances.&rdquo;<br /><br />The CBI also recommends that the government should commit to a more rigorous public finance framework to improve its credibility, including the creation of a Fiscal Policy Committee.<br /><br />&ldquo;There needs to be more detailed scrutiny of the fiscal calculations to keep the Treasury honest,&rdquo; deputy director-general of the CBI, John Cridland, said on Friday.