Get Britain out of the red, says CBI

Employers' group tells Prime Minister: recession won't be over by Christmas

The head of the main employers' organisation told Gordon Brown last night he was guilty of "economic vandalism" and cast doubt on the Government's forecast that the recession would end by Christmas.

Martin Broughton, the president of the CBI, told the Prime Minister that the announcement of a 50p top rate of income tax in last month's Budget was an attempt to "divert media attention" from the Government's failure to get a grip on public borrowing.

Speaking at the CBI's annual dinner in London he said: "Tearing up the [Labour] manifesto commitment to the country's entrepreneurial class – the major job creators – was nothing short of economic vandalism. What's more, the tax take is likely to be minimal."

Although the Government's initial response to the financial crisis had been admirable, he said much remained to be done. With the UK in the teeth of a major recession, the Budget was his "biggest concern". He added: "The use of heroic growth assumptions, together with a timetable extended to 2018, amounted to a serious failure to address the deficit in a way that gives confidence to buyers of our debt."

Mr Broughton said the Government must review its priorities, strip out the "nice to haves" and focus on core activities to bring down the budget deficit. He added that if business was responsible for cutting the deficit, it would "divest or discontinue activities that are peripheral or 'non-core', focus on delivering key services that are currently mismanaged and reform public-sector pensions".

"We would [also] start educating the public to accept that it is not the Government's role to address every issue in society," he added, asking: "How many of the 1,000 quangos costing £65bn a year do we really need?"

Mr Broughton said the public's perception of business had been badly damaged by the financial crisis. "Many of us in the 'real world', as we delightfully like to call it, feel let down by those in the 'financial world' whose actions have damaged us economically but also tarnished our reputations along with their own."

He said a number of positive aspects could emerge from the crisis and that real benefits could be gained from the current mood for global co-operation. Instead of two different groups to represent the world's largest economies – the G8 and G20 – he advocated one medium-sized group. "I don't know what the right G-force is but it's not a G8," he said. "I'd guess that a G15 would be the best outcome, covering 80 per cent of world GDP, and every continent, but bringing emerging economies on to the top table."

In his own speech to the dinner, Mr Brown made clear the Government was sticking to the Chancellor Alistair Darling's forecast that the economy would return to growth by the end of the year.

The Prime Minister promised there would be no "complacency" about Britain's economic situation, but insisted the country was better placed than it had been during previous downturns.

Mr Brown's official spokesman said: "We need to ensure the banks deliver on their commitments on bank lending and we need to push ahead with the action we are taking on fiscal policy in order to mitigate the impact of global problems on the UK." He said that Japan's economy had shrunk by 4 per cent in just one quarter, with the euro area and Germany also suffering bigger falls than the UK.