CBI to press for Budget tax hikes

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The Independent Online

THE GOVERNMENT should consider using Budget tax hikes to dampen down the housing boom and relieve the pressure for interest rate rises, the Confederation of British Industry will say this weekend.

THE GOVERNMENT should consider using Budget tax hikes to dampen down the housing boom and relieve the pressure for interest rate rises, the Confederation of British Industry will say this weekend.

The CBI will call for a debate on the politically sensitive issue at the launch of its annual conference on Sunday. It is concerned about the impact that rate hikes aimed at controlling the booming consumer economy have had on the manufacturing and export sectors.

But it will back away from calling for specific measures to be included in the Budget such as higher stamp duty or VAT on high value transactions. The CBI will also use its pre-Budget submission to urge Gordon Brown, the Chancellor, not to cut personal taxes and fuel an unsustainable boom.

Adair Turner, the CBI director-general, told The Independent: "There should be an open debate on whether there are fiscal tools that could be used to more closely target the specific areas we are worried about."

He acknowledged the Government had already acted by phasing out mortgage interest tax relief from April next year and raising the levels of stamp duty by 0.5 per cent in the last Budget.

"Beyond that the logic would lead one to argue that targeted tax measures would help dampen down volatility in the housing market," he said. "But we realise they are politically sensitive."

The Council of Mortgage Lenders said fiscal measures would distort the market. Sue Anderson of the CML said: "The Bank is most concerned about mortgage equity withdrawal and I can't picture a tax measure that would deal with that."

Michael Taylor, an economist at Lombard Street Research, said measures such as higher stamp duty would be a "political disaster". He said a better strategy would be to encourage the use of long-term fixed-rate mortgages that were less affected by rate hikes.

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