THE government must persevere with plans to cut the UK deficit, the Confederation of British Industry (CBI) said yesterday, ahead of today’s launch of its economic forecast.
“You cannot underestimate the calming effect of ‘Plan A’,” commented Ian McCafferty, the CBI’s chief economist. A ‘Plan B’ of fiscal relaxation could harm confidence and damage the economy, he said.
The CBI said the “restoration of fiscal health” was of prime importance to its members, which total almost a quarter of a million businesses.
The deficit will hit £149.7bn this financial year, the CBI forecasts – a more pessimistic outlook than the most recent predictions of the government’s own fiscal watchdog.
And while the CBI wants a “neutral” budget next month, it called for a “signal” from George Osborne that personal tax rates will be cut in the future. The UK will deter key entrepreneurs if it is seen as a high tax country, CBI director general John Cridland said.
The economy will grow by 1.8 per cent this year, the CBI forecast, and 2.3 per cent in 2012. The forecast is down from its previous estimate, but McCafferty blamed changes in GDP arithmetic, “rather than a fundamental change in the outlook.”