The British Chambers of Commerce has challenged the Chancellor to drop unsustainable ring-fences on health and overseas aid as he seeks to slash spending in next week’s Budget.  

The BCC argues that by protecting certain budgets and programmes without clear justification, it will force more drastic cuts to capital investment, which is essential to underpin Britain’s long-term economic recovery.

By contrast, health and aid budgets were cut in Canada’s successful 1990s consolidation – preventing ‘slash and burn’ elsewhere.  The business group is also calling for the Chancellor to introduce an immediate two-year freeze on the total public sector wage bill; commit to a full reversal of the employer National Insurance rise; and, to avoid potentially damaging increases in Capital Gains Tax.  The measures form part of the BCC’s 11-page Budget submission, which has been sent to the Treasury ahead of the coalition’s emergency Budget. Some of the submission’s key points include: ·        

  • Introduce an immediate two-year freeze on the total public sector wage bill·        
  • Avoid deep cuts to capital investment, which supports growth of the productive economy· 
  • Fully abolish the April 2011 employer NICs rise, paid for by using a portion of any increases in VAT· 
  •  Proceed with the simplification of Corporation Tax, but only after a careful study of how the elimination of allowances could affect business investment·        

 Do not raise CGT to near-income-tax levels. If a rise is unavoidable, clear and concrete exemptions and reliefs for business activity must be detailed, along with taper relief and indexation 

Commenting, David Frost, Director General of the British Chambers of Commerce, said:  “The Chancellor faces a difficult balancing act next week. The right choices would put business growth at the very heart of government policy. But short-term moves on tax or infrastructure spending could hurt business confidence and economic recovery. 

“The government must avoid punishing new taxes that negatively affect private sector growth. Short-term revenue gains would be outweighed by longer-term economic consequences, from reduced business investment to lower rates of job creation. If tax rises are unavoidable, they should be targeted at consumption taxes rather than payroll, income or profits.” On spending cuts, Mr Frost added:

“As politically unpalatable as it may be, the decision to ring-fence spending on health and overseas aid is unrealistic and unsustainable in the current circumstances. Ring-fencing health will mean deeper and more drastic cuts to important investment elsewhere, without the benefit of clear justification. 

“Spending cuts must focus on programme spending and waste, rather than vital capital investment. There should also be an immediate two-year freeze on the public sector wage bill, and urgent reform to rein in the huge costs of public sector pensions.”