BUSINESS leaders in Burton have warned that the Government’s spending cuts programme may become ‘impossible’ if the economy does not ‘improve substantially’ later this year.
The warning from Chris Plant, director of the Burton and District Chamber of Commerce, came just a day before Chancellor George Osborne was due to unveil this year’s Budget to MPs in the House of Commons tomorrow.
The Treasury is under intense pressure from both sides. Supporters believe Mr Osborne must stick to his deficit reduction programme to retain the confidence of financial markets, but critics argue that Britain needs more state spending instead of austerity to stimulate economic growth.
Mr Plant said: “The Government must remain flexible. Although we support deficit reduction, a point may come soon when deficit reduction becomes impossible in the absence of growth.”
He said tax cuts for businesses and infrastructure spending were ways Mr Osborne could stimulate the economy, which spent three quarters of last year in decline.
Mr Plant said: “We have warned the Government that it may have to consider major cuts in business taxation and other radical measures, such as massive infrastructure pump-priming, if growth does not improve substantially later this year.
“This Budget should radically re-prioritise resources within the Government’s existing spending envelope away from unproductive expenditure and toward pro-growth measures that can be delivered fast, especially house-building and local road maintenance.
“These measures will increase economic activity and create jobs, but will come at the cost of difficult decisions on things like universal benefits (such as the winter fuel allowance paid to all pensioners).”
The Government says the deficit, the amount by which the state overspends every year, has fallen by a quarter since 2010. But public sector borrowing is rising, with one influential think-tank even claiming that total borrowing will be £64 billion higher in 2014-15 than forecast three years ago.
Critics of the Government have called for the Chancellor to change course entirely.
Jon Wheale, who will stand for the Labour Party in Burton in the 2015 General Election, said he wanted Mr Osborne to use his Budget to impose a tax on bankers’ bonuses to fund a work scheme for young people who have been unemployed for more than a year. He also urged the Government to introduce a temporary VAT cut to stimulate consumer spending and to reverse its decision to remove child benefits from higher earners. This would be funded, Mr Wheale said, by cutting pension tax relief for those earning more than £150,000 a year.
“Wednesday’s Budget is the last chance saloon for a Government facing abject failure. A Labour chancellor would give the economy both barrels,” Mr Wheale said. “We need a plan for jobs and growth because to get the deficit down we have to get businesses growing and more people off benefit and into work.”
But Burton’s current Conservative MP, Andrew Griffiths, said there was ‘no other way’ to secure economic stability than to continue with the austerity drive.
“The worst thing we could do is borrow more money, get deeper into debt and risk the economy even further by maxing out the country’s credit card,” Mr Griffiths said. “We saw the results of this under the last Labour government so there really is no other way but to live within our means, spend only what we can afford and not borrow more and more.”
Mr Griffiths said he would like to see the Chancellor ‘focus on jobs and helping businesses to grow’ in this year’s Budget.
Mr Griffiths urged Mr Osborne to do more to support manufacturing and construction companies, as well as calling for him to introduce a cap on social care costs so fewer pensioners are forced to sell their homes to fund residential care in later life.
There are also loud cries for the Chancellor to abolish the beer duty escalator — a call backed by both Mr Wheale and Mr Griffiths, who has spoken about the issue in Parliament.
Since 2008, beer duty has risen annually by two per cent plus the rate of inflation. Critics say this has forced up the price of beer, put off drinkers and driven pubs out of business.
Nik Antona, national director of the Campaign for Real Ale pressure group and spokesman for its Burton and South Derbyshire branch, said: “I would like to see a level playing field for the industry so we see beer, pubs and jobs survive.
“Personally, I would like to see a reduction in beer duty but, being realistic, we would accept an increase in line with inflation.”