According to ICAEW, the government will spend more on debt interest this year than it will spend on the Business Department or the Department for Education. In addition, the Office for Budget Responsibility expects the interest bill to rise from £50bn to £75bn by 2018.
DRD is a step too far in a society where such moves should only happen with the agreement of the courts
George Osborne was dealt a further blow last week when it was revealed public sector borrowing had increased almost 10% year-on-year.
In his letter to the chancellor ahead of the Autumn Statement on 4 December, ICAEW chief executive Michael Izza called on the government to put in place measures that will cut the huge deficit and respond to slower economic growth. The latest ICAEW forecast suggests UK growth will dip from 3.2% in 2014 to 2.6% in 2015.
It wants balanced and sustainable growth for all regions, supports greater autonomy following the Scottish referendum and backs a review of business rates.
“We don’t think the chancellor has leeway in the public finances to be radical in the Autumn Statement. That is why we are putting forward pragmatic, sensible solutions that, if implemented, will help bring our debt and deficit under control, and enable balanced and sustainable growth in the long term," said Izza.
He argues that small businesses need better information and advice. He wants the British Business Bank to play a central role in ensuring SMEs are “finance ready”.
ICAEW also repeated calls for a finance leader at the top of Whitehall. While he is “encouraged” by the appointment of a new director general of public spending, the task needs a treasury permanent secretary, according to Izza.
“With many departmental budgets the size of FTSE 100 companies…all need to be tightly managed. Government priorities will always be political decisions but those decisions can be better informed and delivered through strategic financial leadership,” he added.
ICAEW has called for an end to HMRC budget cuts as its funding cannot go any lower without having a "major effect" on service standards. Recent mistakes, such as its recent blunder over millions of tax bills, have highlighted just how “fragile HMRC services are and we believe these should be urgently strengthened”.
Izza calls for a radical reform of HMRC’s heavily criticised “draconian” Direct Recovery of Debt powers, announced in last year’s Autumn Statement, which allow it raid taxpayer accounts for money owed without permission.
“We believe this measure will have the unintended effect of undermining public confidence in HMRC even further. DRD is a step too far in a society where such moves should only happen with the agreement of the courts,” he added.