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CBI calls for clarity on route to economic recovery

Business leaders today urged the Government to deliver a “credible” economic plan for balancing the books by 2016, including lower spending and reform of public services.

The CBI said the Chancellor should use his last Budget before the election to give more details of spending plans for Whitehall departments in a bid to provide economic stability.

In a letter to Alistair Darling, the CBI said “damaging” tax rises should be avoided as the economy is still “fragile”.

The business group also called for the planned rise in employers' National Insurance contributions to be reversed, warning it amounts to a tax on jobs.

CBI director general Richard Lambert said the Budget, expected later this month, comes at a “pivotal” moment, adding: “The UK's deficit, though worryingly large, is still manageable, but the Government must act now to set out a convincing, credible pathway for balancing the books. It is critical that this Budget provides credibility and direction on the public finances, and creates the right conditions for businesses to drive economic growth.”

Ian McCafferty, the CBI's chief economic adviser, added: “The Government should aim to balance the books sooner than it currently plans. A target date of 2015-16 for restoring budget balance would send a powerful message to investors about the seriousness with which the UK is tackling the public finances. This medium-term target is much more important for credibility than the exact start date for action.

“However, in our view, fiscal balance should be achieved by curbing spending rather than increasing taxes, and cutting current rather than capital spending.

“This balance of measures is the most supportive of growth, but will mean grappling with thorny issues such as poor public sector productivity, pay and pensions.

“As well as setting out a more challenging target for the pace of reduction in public borrowing, we would also like to see full details of exactly how the fiscal austerity ahead will translate to departmental budgets.”