Government urged to cool economy by raising taxes

The next government should raise taxes rather than interest rates to cool down the overheating economy, a leading business organisation said yesterday. The British Chambers of Commerce warned of wage pressures at home because of skill shortages and damage to sales overseas because of the strong pound.

This analysis is backed by a new forecast from the London Business School published this morning. It predicts that growth will exceed 3 per cent this year, taking the number of unemployment benefit claimants below 1.5 million. Tougher policy action is needed to head off an inflationary boom, the report concludes, and taxes should be used to take some of the strain off interest rates.

Both followed a similar call by the Confederation of British Industry on Wednesday.

Official figures on Britain's recent trade performance published yesterday showed tentative signs that the increase in sterling during the past six months has started to hit export volumes. The BCC survey was the latest in a series reporting a tailing off in new export orders.

Yesterday's survey, which covers services as well as manufacturing, reported the lowest exports for four years. In manufacturing sales growth had continued to slow, while in services the growth had slowed from its record level in the final quarter of last year.

The weaker export outlook was offset by the strength of domestic demand. Official figures for national output in the first quarter of this year, due this morning, are expected to show growth well above the economy's sustainable trend.

Job creation plans remained buoyant, according to the chambers of commerce survey, with services companies' planned employment at the highest level this decade. But this was leading to recruitment difficulties.

David Richardson, BCC president, said there was a danger skill shortages would fuel wage inflation. "The priority must be to tackle the skills problem which is swiftly becoming the Achilles' heel of the British economy," he said.

Ian Peters, deputy director-general, said: "Whilst many commentators believe that interest rates will have to rise after the election in order to contain inflation, this will have the damaging effect of hurting manufacturing investment and export competitiveness."

Separate figures yesterday showed the gap between imports and exports had widened.

The deficit on trade in goods rose to pounds 758m in February from pounds 535m the previous month. March's deficit with non-EU countries increased to pounds 606m from pounds 437m in February.

Lower import prices kept the import bill subdued. The underlying volume of imports in the latest three months' figures was 6.4 per cent higher than a year earlier. Export volumes were up 6.2 per cent over the same period, but fell 1.5 per cent in the latest month and were virtually flat in the latest three months.

Start your day with The Independent, sign up for daily news emails
Voices
voices
News
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
News
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before