The Institute of Directors has today called on George Osborne to consider and adopt seven “keys to success” which they say will need to be delivered by the Chancellor in the forthcoming emergency Budget.

By adopting the 7 keys to success the IoD say that the Chancellor would help accelerate economic recovery. However failure to adopt them could lead to the dreaded double-dip recession.

The 7 keys to fiscal success are:

  1. Deficit reduction should be overwhelmingly from expenditure cuts not tax hikes.
  2. There needs to be decisive action, not gradualism – faster and deeper cuts than financial markets expect.
  3. There need to be permanent spending cuts, which lower perceptions of the future tax burden.
  4. There should be an expectations-orientated approach which pre-announces long-term tax reductions financed by more immediate spending cuts.
  5. No ring fencing of Departmental spending, only critical infrastructure – key transport, energy & ITC investment spending.
  6. There needs to be credible plans, which can be sustained.
  7. Monetary policy should be used to complement fiscal policy. Tighter fiscal policy can permit continued zero interest rates and possibly a further extension in quantitative easing.

Commenting on the 7 keys to success, Graeme Leach, Chief Economist and Director of Policy at the IoD, said:

“It is vital that the Chancellor adopts the 7 keys to success we’ve set out today if he wants to accelerate economic recovery. The worst thing he could do in the forthcoming Budget is step back from the Conservative manifesto commitment of a 4 to 1 ratio of expenditure cuts to tax hikes.”

The Government must continue to ignore those siren voices which are still saying that early cuts would jeopardise recovery. Provided fiscal tightening is based on lower public spending and not higher taxation, tightening will be good for growth and will actually help kick start the recovery.

See Also

Time for the Headline Rate of Corporation Tax to be Cut

Prepare for VAT to Rise to 20%

What Will Vince Cable Do Now for the Isle of Man?

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