CBI: Treasury needs to save extra 120bn
THE Treasury’s plans to balance the deficit by 2017-18 are not urgent enough and do not have the necessary credibility to underpin the government’s management of the public finances, the Confederation of British Industry will say today.
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.
But achieving budget balance by 2015-16 would require an extra £120bn of savings during this period, of which only a small amount would be achieved automatically through economic growth.
The CBI outlined five areas in which savings totalling an estimated £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 £63bn of savings between now and 2015-16 and outsourcing non-core activities would provide £30bn of savings.
The CBI recognised concerns that fiscal tightening now could tip the economy back into recession, but stressed that “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”.
Shadow chief secretary to the Treasury, Philip Hammond, said: “This report is a shocking indictment of the government’s management of the public finances.”
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.
“There needs to be more detailed scrutiny of the fiscal calculations to keep the Treasury honest,” deputy director-general of the CBI, John Cridland, said on Friday.