UK Govt. Must Cut GBP 120 Bln From Its Spending Plan: CBI

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The British government must cut GBP 120 billion from its current spending plans to boost investor confidence and get the UK economy on the path to recovery, the Confederation of British Industry said Monday.

"Such savings need to be achieved, not through increasing taxes, nor by further hitting public investment in our economy, but through restraint in current spending, by driving up productivity and efficiency across the public sector," CBI chief economic adviser Ian McCafferty said.

The CBI called the Chancellor of the Exchequer Alistair Darling to ensure that his Pre-Budget report delivers a credible plan for balancing the public finances by 2015-16, two years earlier than planned. Darling is due to unveil the Treasury's autumn budget report in the coming months. The HM Treasury forecasts UK's budget deficit to hit GBP 175 billion this year, or 12% of gross domestic product.

CBI Deputy-Director General John Cridland said, "We are facing the biggest peacetime deficit in our history, and it is not simply going to disappear with the economic recovery. That is why we need a fully credible plan to convince financial markets and taxpayers alike that the public finances will be restored to health."

The business group said GBP 50 billion will need to be found between now and 2013 to allow for a slower economic recovery than the government is predicting, and a further GBP 70 billion will be needed after 2013 in order to balance the budget by 2015-16, rather than by 2017-18 as set out in the April Budget. The CBI recommends the government to bring the public finances back into balance, a radical re-design of the way public services are delivered, and to introduce a range of low-cost measures to position the economy for recovery.

"If the government adopts these proposals it could avoid large tax rises and crude spending cuts at a time when the economy is still fragile, while at the same time delivering high-quality public services," the CBI said.

Also on Monday, Brooks Newmark, a Conservative lawmaker said in a paper titled The Hidden Debt Bombshell, published by the Centre for Policy Studies, that government debt is actually GBP 2.2 trillion, more than double of the GBP 805 billion reported by the Office for National Statistics. According to Newmark, GBP 2.2 trillion government debt is equivalent to GBP 85,610 per household and most of the increase in the debt is due to public sector pension liabilities, which he estimates GBP 1.10 trillion.

The British government must cut GBP 120 billion from its current spending plans to boost investor confidence and get the UK economy on the path to recovery, the Confederation of British Industry said Monday. (Market News Provided by RTTNews)