IoD advocates temporary £20 billion fiscal stimulus through 3p cut in income tax and 4p cut in corporation tax

Once in a generation financial crisis means that aggressive use of fiscal policy is needed to support monetary policy in reducing the severity of the recession

Clear plan needed to bring the public finances back to balance in the medium term

As the economic crisis intensifies, and as business leaders wait for details of the Government’s fiscal plans, the Institute of Directors (IoD) today publishes its representations for the Pre-Budget Report:

• The IoD calls for a large temporary fiscal stimulus, to be given through tax cuts financed by borrowing, but also emphasises the need for a clear route back to balanced public finances in the medium term. 

• The IoD believes a fiscal stimulus is necessary because reductions in interest rates will not in themselves turn the economy round. The British and world economies are experiencing a once in a generation financial crisis where monetary policy is potentially pushing on a string. The stimulus should be given through tax cuts and not through increased spending, aside from one-off infrastructure projects which can be brought forward.

• Taxes should be reduced by £20 billion for 2009-10. The IoD is proposing a 3p cut in the basic rate of income tax and a 4p cut in the main rate of corporation tax.

• The Government should plan to phase out tax cuts over a five-year period, in order to bring the public finances back into balance. But it is also essential to control public spending growth, both to minimise the risk that taxes will need to be put up again and to restore the credibility of the UK’s fiscal position with international investors. The IoD is calling for a strict new rule, limiting the real growth in public spending to 2 per cent a year over any five-year period.

Miles Templeman, Director General of the IoD, said:

“The British economy is facing a unique set of once in a generation challenges. In response to these threats we need to see an aggressive use of both monetary and fiscal policy. The Bank of England has stepped up to the plate and now 10 and 11 Downing Street must follow.

“Whilst the IoD continues to advocate a significant medium to long-term reduction in the size of the state we also recognise that extraordinary times call for extraordinary measures. Crucially however, our fiscal stimulus focuses on lower taxes and productive infrastructure investment. Almost the opposite of fiscal policy in recent years.”

ENDS

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Notes to editors

• The IoD (Institute of Directors) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with upwards of 52,000 members in the United Kingdom and overseas.  Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors.  Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies. 
• The IoD offers a wide range of business services which include business centre facilities (including ten UK regional centres [three in London, Reading, Birmingham, Cardiff, Manchester, Nottingham, Edinburgh and Belfast] and one each in Paris and Brussels), conferences, networking events, issues-led guides and literature, as well as free access to business information and advisory services and a comprehensive Information Centre.  The IoD places great emphasis on director development and has established a certified qualification for directors - Chartered Director - as well as running specific board-level and director-level training and individual career mentoring programmes.
• In addition, the IoD provides an effective voice to represent the interests of its members to government and key opinion-formers at the highest levels.  These include ministers, constituency MPs, Select Committee members and senior civil servants. IoD policies and views are actively promoted to the national, regional and trade media. 
• For further information, visit our website: www.iod.com