By Suban Abdulla
LONDON (Reuters) -British finance minister Rachel Reeves should break election pledges not to raise taxes on working people so she can build "real fiscal headroom" in her budget this month, the Confederation of British Industry said on Thursday.
Reeves has warned taxes are likely to rise in her Nov. 26 budget. She did not explicitly rule out raising taxes on workers later this month despite a promise in the Labour Party's election manifesto not to hike income, value-added taxes or social
security contributions paid by workers.
Last year Reeves imposed a big tax rise on employers' social security contributions to raise money for infrastructure spending, which hurt business confidence. The CBI said she should refrain from further hikes in business taxes further.
"The goal of a growing economy that raises living standards across the board won't be achieved until real fiscal headroom is created and the cycle of short-term thinking that's holding the country back is broken," Rain Newton-Smith, the chief executive of the CBI, said.
She added that the Labour Party's manifesto commitments were no longer economically viable.
"Tax rises and spending cuts are unpopular, but the reality is that (Reeves) faces little choice," Newton-Smith said.
The National Institute of Economic and Social Research on Wednesday said Reeves should build 30 billion pounds ($40.26 billion) of margin for error - or headroom - against falling foul of her fiscal rules, higher than the 10 billion-pound buffer at her last budget.
The CBI said Labour should focus on four key areas to snap the economy out the doldrums, including fast tracking the planning process, approving and delivering infrastructure projects.
It also said Reeves should scrap a plan to introduce a 6% tax on international student incomes, boost tax breaks for employers to spend on preventative healthcare for staff, and remove regulatory barriers to boost UK competitiveness.
($1 = 0.7451 pounds)
(Reporting by Suban Abdulla, editing by Andy Bruce)
