CBI's Headquarters

CBI Calls For Tax Increases

It is the first time the CBI has recommended putting up taxes in a budget, but it says increases of around £2 billion are needed to restrain consumer spending and control inflation. It warned that the alternative, raising interest rates, would damage business.

Submitting the CBI's budget recommendations, Director General Adair Turner said: "We do not see the need for the Chancellor to make major changes in this budget, but we must not risk an unwelcome return to the 'boom and bust' of the past."

Mr Turner called on Gordon Brown to leave corporate taxes alone, and to spread personal tax increases around in order to minimise their impact on one particular area of the economy.

The CBI has therefore ruled out the wholesale abolition of MIRAS (Mortgage Interest Relief at Source), or a significant hike in duties on cigarettes or alcohol. It warned that if taxes did not rise then interest rates may have to go as high as 7% by the end of the year, hitting British exporters even harder.

The figure of £2 billion is much lower than the £6 billion recommended by merchant bank Goldman Sachs last month. Mr Turner said: "Subsequent economic data has pointed to slower than anticipated retail sales growth, with pleasant inflation surprises in retailing, manufacturing and the labour market."