TAX NEWS - June 2010

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British Tax: Emergency budget must avoid tax rises: CBI

LONDON — The new coalition government must avoid "damaging" tax hikes in this month's emergency budget, the Confederation of British Industry warned on Thursday.

The country's biggest employers' organisation said it had written to new finance minister George Osborne to ask him to focus on spending cuts in his emergency June 22 budget that will address the record public deficit.

"The CBI has urged the government to increase confidence in the public finances by bringing the deficit rapidly under control in a way that does not undermine the economy's ability to grow," it said in a statement.

"The UK's leading business group argues this should be done by controlling spending rather than increasing taxes.

"The government should focus on current spending, with a radical re-engineering of public services to deliver more with less, rather than reducing spending on capital infrastructure."

John Cridland, deputy director-general at the CBI, added that tax hikes would make it harder for companies to win business, while effective cost-cutting would protect future growth.

"The UK's future economic prospects depend on the ability of firms across the country to create new jobs and win orders. Increasing taxes makes this more difficult," Cridland said.

He added: "A radical re-engineering of public services is a must if damaging tax rises are to be avoided. Only an effective cost reduction strategy can safeguard future growth."

The coalition axed 6.25 billion pounds of "wasteful" public sector spending last month as it sought to cut the deficit.

At the same time, Osborne set up an independent body, the Office for Budget Responsibility, to publish economic forecasts. The group will issue its first set of forecasts on Monday.

"The business group welcomes the action taken so far by the government to tackle the deficit and urges it to use the budget to reinforce the UK's fiscal credibility by announcing a faster reduction in the structural deficit, based on more rigorous economic assumptions and backed by more detail on spending plans," the CBI added on Thursday.

The Confederation of British Industry represents some 240,000 businesses across the country, which together employ about one third of the workforce in the private sector.

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