Business chiefs urge Darling to tackle UK debt

CHANCELLOR Alistair Darling is facing calls by two of Britain's leading business organisations to explain how he is going to tackle the UK's debt.

With a Budget expected before the end of the month, Mr Darling is facing demands that he cuts public spending and avoids raising taxes.

The Confederation of British Industry (CBI) and the Institute of Directors (IoD) have also both raised concerns over the UK's triple A credit rating if action is not taken to cut public spending.

Their submissions come as a leading Scottish economist, Professor David Bell of Stirling University, warned that the Scottish Government needs to tackle the amount spent on salaries and pensions in the public sector, and could have to make similar tough decisions to the Irish government, which raised taxes and cut public sector pay last year.

Conservative shadow Scottish secretary David Mundell and former Labour Scottish Office minister David Cairns have both refused to rule out cuts to the Scottish budget.

The two accused the SNP of being dishonest over the current economic situation in suggesting that Scotland should be protected from cuts.

The CBI 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 that the Chancellor should use his last Budget before the general election to give more details of spending plans for Whitehall departments in an effort to provide economic stability.

In a letter to Mr 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, is coming at a "pivotal" moment for the economy, adding: "Investors are clearly jittery about sovereign debt, but are prepared to give the UK the benefit of the doubt until after the election. 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."

Meanwhile, the IoD said the next government will have to take measures to cut the UK's budget deficit as soon as it takes office.

The economic recovery could receive a boost if public spending was cut as part of fiscal tightening, said the IoD in its business manifesto.

Politicians were warned that the economy could be damaged if the debate about how quickly to tackle the deficit continued. A survey of 1,500 IoD members showed that almost nine out of ten believed current levels of public spending should be cut, most saying that reductions should start this year.

Miles Templeman, director general of the IoD, said: "We are convinced that we need swift action to tackle the budget deficit. This means making significant spending cuts in 2010. The argument that early cuts would jeopardise the recovery is mistaken. We believe lower spending is likely to trigger a whole series of positive developments that will assist growth."