THE GOVERNMENT cannot afford to make big Budget giveaways this week and must focus on reducing its huge annual deficit, two leading business and economic groups have said.
“I don’t think the country can afford significant tax cuts if it really wants growth,” Confederation of British Industry (CBI) chief John Cridland told the BBC yesterday.
The CBI is endorsing only £500m worth of budget cuts, targeted at infrastructure and small businesses. “I don’t think this is the Budget to be talking about big giveaways,” Cridland (pictured) said.
This morning Cridland’s verdict was echoed by economists at the Ernst & Young Item Club.
Despite the chancellor being on course to beat this fiscal year’s borrowing target by £7bn, Item has cautioned against a “spring spending spree”.
Such fiscal stimulus “would only have a limited macroeconomic impact and could also send the wrong signals to rating agencies and the financial markets,” Item said.
“We would like to see the chancellor use his windfall as a buffer against any potential escalation of the Eurozone crisis and invest in small, low cost measures designed to boost the UK’s productive potential,” said Item’s senior economic adviser Andrew Goodwin.