The prime minister's new coalition government has been welcomed by lobby groups and praised by Bank of England governor Mervyn King.
The Conservatives and Liberal Democrats have entered into a full coalition in order to command a majority in the House of Commons, which new prime minister David Cameron said would create the "strong and stable government the UK needs".
Cameron's new cabinet comprises members of both parties, including Nick Clegg as deputy prime minister, George Osborne as chancellor and Vince Cable as secretary of state for business and banking.
Details of the coalition policies are still emerging but it has been announced there will be an emergency budget within 50 days.
The new government will scrap part of Labour’s planned National Insurance rise and there will be phased reform of the tax system including eventually raising the tax free threshold on income tax to £10,000. The budget deficit will also be tackled with plans to cut spending by £6bn this year.
The proposal for spending cuts was praised by Mervyn King who said the plan was “strong and powerful”.
The British Chambers of Commerce (BCC) said it looked forward to working with the new coalition government and that it would judge the new administration on what it did to promote business recovery.
“Fixing the public finances must be at the top of the agenda,” said BCC director general, David Frost. “The Conservative-led coalition must be absolutely clear about where spending cuts will fall, and about the need to curb relentless growth in the size and cost of the public sector.”
The Federation of Small Businesses (FSB) said it welcomed the fact that both parties had made compromises to safeguard business confidence citing the scrapping of the National Insurance increase as a key policy. It also welcomed the planned increase to the income tax threshold.
John Walker, FSB national chairman, said: “We are pleased that coalition negotiators have listened to the business community [on NICs].”
“A healthy increase in personal tax thresholds is something that FSB has been urging for some time. This will not only provide more disposable income for the lowest paid workers, but will also encourage businesses to take on more staff.”
The Forum of Private Business (FPB) also welcomed Cameron’s appointment but urged the new cabinet to let go of political allegiances in favour of the economy.
“Hopefully, Mr Cameron's appointment will herald the beginning of a workable government which will ensure economic stability and give smaller firms the confidence to aspire and grow,” said Phil Orford, chief executive of the FPB.
“I would just like to reiterate the Forum's previous calls for politicians of all political persuasions to show responsibility and put aside their differences in order to avoid pushing the UK into further economic turmoil.”
© Crimson Business Ltd. 2010