Page last updated at 17:43 GMT, Friday, 1 January 2010

CBI head calls for UK deficit action

Richard Lambert, CBI
Richard Lambert said there was still no clear and credible strategy

The head of the CBI has called on ministers to bring forward plans to deal with the UK's deficit within the lifetime of the next Parliament.

Richard Lambert said he was "not satisfied" with the plans set out by Chancellor Alistair Darling in last month's pre-Budget report.

He said it had put off the "heavy lifting" needed to reduce the £178bn deficit, for five years or more.

But he was upbeat about 2010, saying national income was expected to grow.

However he said there was a "terrific amount of uncertainty" about the economy generally - not least because of the impending election.

It's leaving a lot of the heavy lifting in terms of getting the public finances back into shape to the parliament after next - that's not starting for five years
Richard Lambert

The government had not yet set out a credible pathway back to fiscal stability, he said.

Among Mr Darling's announcements in early December was a plan to put National Insurance up by 0.5% more than previously planned, from 2011.

Public sector workers also face a 1% pay cap.

In his final pre-Budget report before a general election, the chancellor also announced a bank bonus tax and a home boiler scrappage scheme.

He said he wanted to be fair, promote growth without "wrecking" recovery, but the Conservatives accused him of putting off tough decisions on spending because of the coming election.

'Squeeze' timing

Mr Lambert - who is director general of the business organisation - said the government's promise to halve the deficit within four years was not enough.

He said that pledge was no substitute for plans spelling out how to fix the "big structural problems" in public finances.

Mr Lambert said in 2010 the economy would benefit from a more stable banking and business environment and trade would be boosted by the low value of sterling.

Alistair Darling delivering his pre-Budget report
The pre-Budget was said to be setting the tone for the election campaign

Meanwhile the pain from dealing with the deficit was unlikely to be felt until 2011, he said.

Although the Conservatives have said they would rein in borrowing more swiftly than the Labour government, Mr Lambert said it was "highly unlikely" the squeeze would start before the second half of next year, whichever party won the election.

He told BBC Radio 4's Today programme: "The government... takes the view that the economy is pretty fragile now - and it's right - and that slamming on the brakes now could send us back into the spin and therefore they shouldn't be putting a squeeze on until the second half of 2011.

"Even if there is an election and the government changes hands, not much will happen before then anyway.

"That is one reason why there is such a terrific amount of uncertainty about the economy going forward."

'Baseless assertion'

Mr Lambert added: "I'm certainly not satisfied with the government's plans.

"It's going to be publishing in the next few days legislation which says it is going to halve the deficit within the next four years, but it's a bit like me saying [because] I'm going to join the gym, that means I'm fit already.

"It's leaving a lot of the heavy lifting in terms of getting the public finances back into shape to the parliament after next. That's not starting for five years.

"We do have big structural problems, but they can be fixed in the lifetime of the next parliament provided we are serious about it."

Philip Hammond, shadow chief secretary to the Treasury said, Mr Lambert's comments struck "a blow at the heart of Gordon Brown's baseless assertion that dealing with the deficit would damage recovery".

"On the contrary, the CBI has added to the long list of commentators who agree Britain urgently needs a credible plan to deal with the deficit to secure recovery," he said.

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