Protecting budgets ‘damages recovery’
RING-FENCING health and overseas aid budgets is unjustifiable, and poses serious risks to the UK’s economic recovery and future growth.
That’s according to Peterborough Chamber of Commerce, whose chief executive, John Bridge, claims 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.
Mr Bridge also warned that punishing new taxes that negatively affected private sector growth must also be avoided to ensure that short-term revenue gains would not be outweighed by longer-term negative economic consequences.
The warnings come less than a week before Chancellor George Osborne is due to deliver his emergency budget, within which he is widely expected to confirm significant cuts to capital investment plans.
Mr Bridge said: “The Chancellor faces an unenviable task next week, but it is essential in our eyes that he focuses on putting business growth at the very heart of government policy.
“Our greatest fear is that short-term tax increases and cuts to infrastructure spending will damage business confidence and delay economic recovery, hindering job creation and discouraging business investment.
“While we do not endorse spending your way out of a recession, indiscriminately slashing investment in infrastructure will have a catastrophic effect on the private sector’s ability to drive the economy forward.
“The decision to ring-fence spending on health and overseas aid is less than sensible, and unsustainable in the current circumstances, unavoidably resulting in deeper and more drastic cuts to important investment elsewhere.
“Here, in the East of England, business is relying on a sensible and co-ordinated, strategic approach to investment that will enable the region to remain one of the three most productive areas in UK.
“In particular, the renewal of transport infrastructure must continue, even in the face of the toughest public spending climate in decades.
Mr Bridge added: “Our members would like to see the Chancellor turn his attention to the public sector wage bill, which is utterly out of touch with the real world, and commit to the urgent reforms needed to rein in the huge costs of public sector pensions.
“The Government must avoid punishing new taxes that negatively affect private sector growth.
“Short-term revenue gains would be outweighed by longerterm 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.”
warning: Chamber chief executive John Bridge.