THE NEXT government should make slashing the UK’s ballooning budget deficit its number one priority to head off a slide back into recession, according to a poll out today.
Urgent action, such as freezing public sector wages and reforming public sector pensions, should be taken as soon as it enters power, according to a poll of 412 businesses by the British Chambers of Commerce (BCC).
The lobby group – led by director general David Frost – is calling for the repeal of the recent hike in national insurance, to be replaced by a one per cent hike in Vat. More than half of businesses believe a double-dip recession is likely and many said ministers should scrap a one per cent rise in National Insurance contributions planned for 2011.
The revelations coincided with a warning from top economists that the government lacks a credible plan for cutting the deficit and that action to reduce borrowing should start straight after the election.
The experts said in a letter to a Sunday newspaper that a failure to act fast could spark a loss of confidence that may lift interest rates, undermine the pound and threaten the recovery.
While the economists insisted they were impartial, their views and the findings of the survey are likely to be seen as an attack on the government’s economic policy, which advocates a more gradual approach to cutting spending, and an endorsement of the more hardline Tory approach.
The survey showed that 41 per cent of companies believe a new government should prioritise cutting the deficit. About 22 per cent called for a cut in red tape and 13 per cent urged an increase in tax competitiveness to stop firms quitting the UK.
A fifth said a double dip recession was very likely, while 55.1 per cent said it was likely and 23.8 per cent said it was unlikely. Firms named a Vat rise as the type of tax hike that would do least damage, with a rise in national insurance seen as the most damaging.