CBI Budget Submission misses target
I would really have liked to be positive about the CBI’s Budget Submission, given the gravity of the economic situation in which we find ourselves. Here we are, probably two months before a General Election, holding our collective breath and hoping the next growth figures will show the economy still recovering, rather than back in recession. It would have been great if we could agree on the major challenges facing us. Sadly, that is not to be.
The CBI’s prescription is wrong because its objectives are wrong. Running through its submission seems to be a belief that only the economy matters. The needs of society are not worth a mention. What’s more, the most important things about the economy are those that the markets think are important.
The debate about the UK’s AAA debt rating is important, but cannot be allowed to overshadow a serious discussion about how we move the economy forward. What is more, politicians – from whichever political party wins the next election – will need to judge repaying the deficit with holding social solidarity together. If, as the CBI suggest, PBR 2009 showed a downward revision to the level of the structural deficit, relative to the Budget 2009 estimates, that allowed either an earlier repayment of the debt, room for lower tax increases or slightly higher spending than previously expected. Public spending is about to take such a hit that softening the cut slightly was surely no bad thing.
This brings us to the crux of the CBI submission. The CBI calls for fully transparent public finance plans in the Budget. That can’t happen in a Budget so close to a General Election, for political reasons (seasoned observers like me remember John Smith’s Shadow Budget in the 1992 Election Campaign and the target this gifted the Tories at that time). However, I hope we get that level of transparency from all the major parties when the campaign starts and probing questions are being asked. Such transparency would allow voters to judge the relative merits of each party and cast their votes accordingly. Knowing who wants to cut, who wants to spend, by how much and with what objectives in mind, would be a victory for democratic debate. It might even allow an election campaign that isn’t dominated by trivia around Gordon’s handwriting or David’s airbrushed posters. But I won’t hold my breath.
The CBI then argues, quite rightly, for the importance of capital investment, before reaching the wrong conclusion that the priority, therefore, is to slash current spending. Balancing the budget by 2015-16, two years earlier than the Government plans, which the CBI calls for for no apparent reason, would require current spending to fall by around 8% of GDP from its 2009-10 peak by 2015-16.
The CBI doesn’t say where the axe should fall. The CBI never says where the axe should fall. It argues for a public sector pay freeze (while, on the very next page of its submission, expressing concern about the tax burden on those on high incomes, including non-doms) and lower public sector pension costs, but this can’t hope to make up the spending cuts that the CBI calls for. So should schools be cut? Or hospitals? Or help for the elderly? I think we should be told.
Freezing public sector pay and reducing its pensions won’t solve the problem either, it will simply create a recruitment crisis in the very public services that we need to get us from downturn to recovery.
The TUC will call for a Budget for growth this year. We won’t grow by prioritising markets at the expense of society. We’ll do so by recognising that a strong society and a healthy economy go together. The TUC will keep an eye on this debate, which will dominate the election campaign, with great interest in the weeks ahead.