The Confederation of British Industry is calling on Chancellor George Osborne to cut taxes to boost growth as it becomes the latest to downgrade growth forecasts.
In an interview with the Financial Times, CBI director General John Cridland calls for Osborne to scrap the 50p tax rate and reduce national insurance contributions for employers hiring 16 to 24 year olds as part of the second leg of the Government’s plan for growth, due in November.
Cridland says: “Times have got tougher and we need more action. It is time to get moving; extra gear, more urgency, more action. It is no good having a growth review focused on five years time; we ain’t got five years. It is about growth over the next 12 months.”
He also called for the Government to underwrite some mortgage indemnity insurance to give building societies more confidence to issue loans by providing some protection against the risk of negative equity. He added that Government should introduce road tolling to get private sector money into infrastructure projects “that will get spades in the ground and people working today”.
Five weeks ago the CBI projected growth of 2.2 per cent for 2012. Now Cridland says he expects the level of growth in the economy next year to “start with a one”. The Office of Budget Responsibility, the Bank of England and the British Chamber of Commerce have all recently downgraded their growth projections for the UK.
Yesterday’s index of demand for services showed the sharpest drop in a decade prompting David Blanchflower to become the latest voice to warn of a double dip recession. Shadow Treasury chief secretary Angela Eagle says the fall in the August services PMI index from 55.4 to 51.1 adds to the “bleak picture” of the UK economy.
Today, Osborne and Shadow Chancellor Ed Balls will face each other at Treasury questions. Labour is likely to continue to push for a temporary cut in VAT and for a slowdown in spending cuts. Osborne could use the dispatch box to wratchet up the pressure over reforms to the UK’s planning system, which in an article co-authored with Communities Secretary Eric Pickles, he says is the key to economic recovery.