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Budget must centre on ‘spending cuts not tax increases’

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The government needs to focus on spending cuts rather than increases in business taxes, the British Retail Consortium (BRC) has urged in its pre-Budget submission to the Chancellor.

In its report, the BRC said it supported government plans for an 80:20 split in public cuts relative to tax increases.

The business group also said that halving the deficit over four years strikes the best balance between the need to reduce the deficit in the short-term and support strong economic growth in the long-term.

In particular, the BRC warned against any rise in VAT and against imposing a charge on goods that are currently zero-rated such as food and children’s clothes.

Other measures the BRC would like to see introduced include limiting future increases in the national minimum wage so that they are no higher than average increases in earnings across the economy.

Businesses that are affected by Business Rate Supplements should be given a mandatory vote before the levy can be applied.

And, in the BRC’s view, the Better Regulation Executive must have the power to prevent the introduction of new regulations that do not improve existing measures.

Stephen Robertson, the BRC’s director general, said it was the right approach to focus on public spending cuts rather than tax increases but added that the government mustn’t risk cutting too quickly.

Mr Robertson commented: “The best way to protect long-term growth is to halve the deficit over four years, rather than three.

“VAT shouldn’t be increased as it would have negative impacts on retailing and the wider economy. Zero-rated items, such as food, books and children’s clothing, shouldn’t have VAT applied to them as it would hit the most vulnerable members of society the hardest.

“The government must make long-term decisions that result in a consistent and predictable business environment – this will encourage investment.”