CBI presses Brown for business tax cuts

THE CONFEDERATION of British Industry is pressing for a cut in business taxes to help businesses cope with the global economic downturn.

The employers' organisation is expected to call on the Chancellor, Gordon Brown, to alter the way corporation tax is paid following changes in the last Budget which, according to CBI estimates, added pounds 8bn to industry's tax bill.

The CBI will also warn Mr Brown against imposing an energy tax on business when he delivers his pre-Budget statement next Tuesday.

The Chancellor's statement is expected to confirm that the Government has slashed its growth forecasts for next year by between 1 percentage point and a half point, putting pressure on Mr Brown either to raise taxes or cut spending.

Speaking ahead of the CBI's annual conference, starting on Sunday in Birmingham, Adair Turner, the director-general, said the Chancellor should hold his nerve.

He said public finances were strong enough to justify a short-term increase in borrowing to fund the Government's pledge of an extra pounds 40bn for health and education. Mr Turner said: "We are not in the camp of those saying we want some sort of panic tax rises or cuts in public spending, because that would be precisely what you don't want to do as you go into a recession or significant slowdown."

Although the CBI is preparing to cut its forecast for growth next year to below 1 per cent, Mr Turner said he still believed Britain would avoid a recession. There was no evidence of UK industry facing a credit crunch with banks refusing to lend and calling in loans, he said.

The European single currency will feature heavily at the CBI's conference. Although one-fifth of CBI members oppose economic and monetary union, Mr Turner said that the way Europe had weathered the economic upheaval of the past four months had strengthened the case for EMU.

"What this period of market turmoil has illustrated is that Europe has clearly benefited from the existence of a de facto system of fixed exchange rates. Imagine what would have happened during this period of turmoil, with the Russian crash and the upheaval in emerging markets, if Europe has been on fully floating exchange rates. There would have been a flight to quality that would have made the impact of the Russian crisis on Europe worse."

But Mr Turner criticised the new European Central Bank for failing to set a minimum inflation target. He said this could result in monetary policy being too tight and dragging Europe into deflationary recession.