CBI eyes Budget confidence boost

The government has been borrowing heavily

Business group the CBI has called on the chancellor to use the Budget for "confidence-building" measures to boost jobs, investment and competitiveness.

It says the "alarming" state of public finances should rule out any major fiscal stimulus in April's Budget.

The UK's cumulative deficit for the fiscal year so far is £75.2bn, raising the chance annual government borrowing will exceed its own £77bn forecast.

CBI deputy chief John Cridland said the public finance outlook was "alarming".

Last month the CBI predicted that the government will have to borrow £100bn more than anticipated during the recession.

Tax bill fears

Mr Cridland, the CBI's deputy director-general, said: "The public finances have been battered by the cost of rising unemployment and lower tax receipts during the recession.

"With economic activity expected to contract by 3.3% and unemployment set to reach nearly three million this year, the outlook for the public finances is already alarming.

"Against this backdrop, a further significant fiscal stimulus is unaffordable and would lead to businesses and households retrenching in fear of higher tax bills in the future."

He said that instead Chancellor Alistair Darling should let the "considerable stimulus already in the pipeline" take effect and deliver a clear and credible plan for restoring the public finances to health.

He said there needed to be measures to instil confidence by supporting as many businesses through the recession and safeguarding as many jobs as possible.

Scrappage scheme

The CBI has put forward a number of tax proposals to support competitiveness, employment and investment.

These include delaying the planned rise in 2011 of employer national insurance contributions from 12.8% 13.3% to reduce the cost of employing people, and restoring empty property rates relief to its pre-2008 position.

"With firms demolishing property as they cannot afford to pay the rate, at the very least the government needs to bring in a 50% reduction, as allowed for in current legislation," the CBI says.

It also proposes freezing business rates for two years to "iron out" the impact of peaks and troughs in RPI inflation.

And it also wants to introduce a temporary scrappage scheme to encourage consumers and businesses to replace old cars, vans, fridges and washing machines with the latest efficient models, which it says would bring forward spending and reduce carbon emissions.