Budget should centre on spending cuts not tax rises

1 March 2010

The Chancellor should focus on reductions in expenditure rather than on tax increases when he delivers the final Budget before the next election.

That was the message from the British Retail Consortium (BRC) in its Budget submission.

The only way to deal with the rising public finance deficit is to rein in non-essential government spending, the BRC argued, because raising tax levels could risk a return to recession.

In its submission, the BRC said: "The key challenge for the government in the Budget is to outline a credible plan for addressing the fiscal deficit without precipitating a 'double dip' recession. A significant focus must be on driving efficiency and productivity in the public sector, and de-commissioning services that Government can ill afford to continue."

As well as tackling public finances, the BRC highlighted other areas that will be central to achieving a return to sustainable economic growth.

Employment costs, the BRC continued, threaten new job creation. With the 1 per cent increase in National Insurance planned for 2011 posing an additional £220 million in costs for retailers alone, the government should scrap the increase. It should also impose a 1 per cent ceiling on any rise in the national minimum wage this year.

The government should re-examine business rates too. The BRC pointed out that, as a result of the five-year revaluation, retailers across the UK face hefty increases this April. In some cases, the rises could be on top of the deferred part of the inflation-busting 2009 increase postponed from last April.

Last year, local authorities in England and Wales were given the power to add to business rates through Business Rates Supplements scheme.

In response, the BRC wants to see affordable increases in business rates; those businesses affected by BRS to be given the legal right to vote down any local authority plans that will not deliver adequate local economic benefits; and an extension to the temporary Empty Property Rate Relief, allowing more empty properties to qualify for an exemption to business rates until 2012.

Elsewhere in its submission, the business group called for the government to provide more incentives to encourage businesses to use renewable fuels and technologies, and to extend the boiler scrappage scheme to other inefficient household appliances.

Stephen Robertson, the BRC's director general, said: "The size of the country's deficit means action must be taken. To nurture our fledgling recovery, the main tool for dealing with the deficit has to be cutting non-vital public sector spending.

"Some tax rises maybe inevitable, but no government should rely on tax hikes to reduce borrowing. The increases would have to be so large that customers' ability to spend would be wrecked - risking a double dip recession."

Mr Robertson went on to urge the Chancellor not to make employing people more expensive for businesses.