Warning that spending cuts will be bad for business

freelancesupermarket.com newsroom

10 June 2010

With the emergency budget just 11 days away, John Philpott, the CIPD’s chief economic adviser has warned that the coalition’s plan to reduce the fiscal deficit will stall the recovery and lead to nearly 3 million people being without a job.

He said yesterday that there is very little chance of real wage growth until 2015 at the earliest. The outlook is even worse for workers in the public sector who face pay cuts and the prospect of up to half a million redundancies forcing employees to join the dole queue.

The CBI is calling for £4 in spending cuts for every £1 raised by increasing taxes. It has warned the government not to damage growth prospects by imposing drastic cuts to the public sector budgets. The CBI shares the view of the REC that the best way forward is to reform the provision of public services.

John Cridland, the CBI's deputy director general, said that in order to safeguard future growth, an effective cost reduction strategy must be implemented.

Meanwhile, the ICAS has written to Vince Cable, the business secretary, urging him to focus on helping SMEs grow. Specifically, they want to see the government put more pressure on financial institutions to lend money to limited company contractors at reasonable rates.

Most SMEs are still struggling to raise finance through the banks as the strict lending criteria imposed during the economic crisis are still in force.

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