CBI, the Confederation of British Industry, has called for childcare subsidies and tax cuts for working families to help improve their living standards. The business lobby group said radical ideas are needed to raise standards for families and low-income workers.
The group is calling for changes to NI and an extension of free childcare and maternity pay in the immediate future – a part way gap to achieving the overall cuts of £7bn that it is asking for.
John Cridland, the director general of CBI, said: “The financial crisis and slow recovery have hit people’s finances hard. Living standards will gradually improve as the economy does. But growth on its own will not be the miracle cure.”
Part of the recommended changes include a gradual increase in the threshold at which employees pay NI to £10,500 over the next parliament, which would have a similar function to the current personal allowance for income tax. If enacted, the CBI said such a threshold would equate to £363 a year in take-home pay for households with two earners.
However, Cridland also said that the measures would not amount to the government abandoning its deficit reduction plans, despite the proposed £7bn cut. He advocated that the cuts would boost growth through additional consumer spending and generating greater future tax revenues. Once these benefits are factored it, the CBI estimated a net cost to the treasury of £3bn.
He said: “Tackling the deficit is an absolute priority, but I don’t think it’s an either/or debate. We need to be more ambitious about the ways we tackle the deficit. Deficit reduction doesn’t have to be cut and slash.”
Meanwhile, he rejected the idea that businesses are to blame for falling living standards.
“You can’t mandate increases in wages. Wages are at the level that an employer can sustain with the business that they can generate,” he said.
“The National Minimum Wage is about ability to pay. The Living Wage is what people need to earn. Should companies pay the Living Wage if they are able to? Yes. I would encourage them to. Can it ever be more than an encouragement? No.”