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CIPD calls on chancellor to avoid aggressive austerity measures and bolster economic confidence

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As the chancellor prepared to give his much anticipated Pre-Budget Report this afternoon, the CIPD has called on him to keep the rate of VAT at 15% until April 2010 and extend the Job Guarantee for long-term claimants of Jobseekers Allowance for those aged 18-24 to those aged 50 and over.

The CIPD's chief economic adviser, John Philpott (pictured), said: "Although the chancellor should use the Pre-Budget Report to demonstrate he has a credible medium-term plan for cutting the record fiscal deficit, now is not the time for aggressive austerity measures.

"The chancellor's immediate priority must instead be to bolster economic confidence and offset the risk that a weak and uncertain recovery will trigger a further bout of redundancies in 2010. A ‘job-loss' recovery would not only be a kick in the teeth to millions of workers who have accepted shorter hours or pay cuts in the hope of staying in work but might also cause the economy to fall back into recession.

"In order to bolster confidence the chancellor should consider delaying the restoration of the rate of VAT to 17.5% until 1 April 2010. Mr Darling should also extend the Job Guarantee for long-term claimants of Jobseekers Allowance for those aged 18-24 - due to take effect in 2010 - to those aged 50 and over. The chancellor could offset the cost of these measures by introducing a freeze on the public-sector pay bill for all non-military personnel. This would be good for the public finances and make the employment consequences of unaffordable pay awards clearer to public-sector managers and unions."