The CBI and IoD back the Conservatives on early spending cuts

Higher interest rates, a weaker pound and slower economic growth are all likely if Britain does not start cutting spending soon, as the Tories have suggested. That's the verdict of Britain's two most important business groups, the Confederation of British Industry and the Institute of Directors.

In a letter to the Chancellor of the Exchequer, the CBI's Director-General urges the Government "to set out a convincing, credible pathway for balancing the books." "It is critical," he continues, "that this Budget provides credibility and direction on the public finances."

In a further endorsement of the Tories' fiscal strategy - recently endorsed by the Wall Street Journal and 20 top economists - the CBI also says spending cuts rather than tax rises should take the lion's share of the budget adjustment.

Miles Templeman of the IoD backed the CBI line:

"We are convinced that we need swift action to tackle the budget deficit. This means making significant spending cuts in 2010. We believe that lower spending is likely to trigger a whole series of positive developments that will assist growth."

George Osborne welcomed the intervention of the CBI and IoD:

"The voices of British business are now saying what we Conservatives have been saying: earlier action on the deficit is a key to securing the recovery. It is a huge vindication of our approach. There is an emerging consensus that Gordon Brown's economic approach is simply not credible By threatening our credit rating and higher interest rates, it is threatening jobs and prosperity."

More in The Daily Mail and Telegraph.

Labour, reports today's Independent, is making the job of any incoming Tory government even harder by rushing through £11bn of pet spending projects. It's all part of Labour's scorched earth policy that adds to the party's nightmare inheritance, should it win a majority.

Tim Montgomerie