Budget deficit 'must be new government's first priority'

Research by the British Chambers of Commerce (BCC), published today, also shows that just over a fifth of the 400-odd firms questioned believe that cutting red tape should be the top priority for an incoming administration.

Some 13 per cent argued that the focus should be on making the UK's tax system more competitive.

Businesses said that increasing National Insurance contributions (NICs) would be the most damaging tax.

BCC director general David Frost said: "The message from business is clear. After an election, we have to get a serious grip on the country's public finances and escalating debt.

"Cutting the deficit means making tough decisions on spending, like freezing the public sector wage bill and reforming public sector pensions.

"Companies have, and will, continue to play their part in creating wealth and jobs, generating economic growth and driving recovery, but the right environment needs to be in place."

He labelled the planned 1 per cent hike in NICs from 2011 a "tax on jobs", calling for the increase to be scrapped and offset with a 1 per cent VAT increase.

"It's a tough call, but we have to be realistic about repairing the public finances, and promoting recovery," Frost added.

The BCC report comes after a group of eminent economists yesterday warned that the government was putting Britain's economic recovery at risk without a "credible" plan for cutting its massive budget deficit.

In a letter to a Sunday newspaper, they urged whoever won the forthcoming general election to present a "detailed" strategy to wipe out the underlying, structural deficit within five years.