The government must ensure that businesses do not bear the brunt of any efforts it makes to address the gaping budget deficit, a lobby group has warned.
The caution from the British Chambers of Commerce (BCC) came as official figures revealed the full extent of government borrowing in 2009, which hit a record £77.3bn in the first six months of the financial year.
The figures, released today by the Office for National Statistics (ONS), also showed that net public sector borrowing was £14.8bn in September, compared to £8.7bn in the same month last year.
The organisation said there is now a danger that net borrowing in the current financial year will exceed the £175bn forecasted in the last Budget, unless a clear improvement becomes evident over the next few months.
David Kern, chief economist at the BCC, said tackling the budget deficit without causing businesses to suffer was now the key challenge facing the government.
“Although there is hope that the UK recession is ending, the economy is still weak and it is too early to start tightening policy. The UK must produce a credible medium-term plan to cut the deficit, to ensure that our international credit rating is not threatened,” he said.
“The scale of the adjustment facing the UK over the next few years is unprecedented. Unless the government demonstrates that it can tackle the deficit without damaging wealth-creating businesses, the recovery will be threatened, the deficit will worsen further, and the country will face serious risks of further declines.”
According to the ONS, the UK’s national debt now stands at £824.8bn (59% of GDP), as of the end of September, or £682.8bn excluding financial sector intervention.
© Crimson Business Ltd. 2009