The CBI has warned Gordon Brown not to jeopardise economic stability in his forthcoming Budget.

On March 16, the chancellor will outline his financial plans to MPs.

And in its submission to the Treasury, the business organisation warned that corporate profitability is being "squeezed" by factors such as increased global competition and rises in the price of raw materials.

"As corporate profitability is constrained so are Treasury tax receipts but, no matter how tempting, there should be no hikes in business taxation," said director general Sir Digby Jones.

"The economic outlook is already uncertain and any increase in bottom line costs will have a serious and lasting effect on investment and the UK's long-term ability to compete.

"Our stable, successful economy is the result of many hard won battles, the government should do nothing to jeopardise it."

The CBI also warned that companies had been hit by the effects of public sector expansion, tightening labour market conditions, and the added cost of pension fund top-ups.

Efficiency targets

And there was concern about the progress made in implementing the efficiency targets in the 2004 spending review.

The absence of departmental plans setting out clear milestones, timeframes and expected achievements was one area highlighted in the submission.

The CBI also asked the Treasury to extend the tax treatments available to investors in unquoted companies to investors in small quoted companies, and allow smaller companies which lease equipment to qualify for the higher first year capital allowances.

Despite record profits reported by banks and oil companies, Sir Digby said the government should not implement any "windfall" taxes.

"Windfall taxes may be seen in certain quarters as somehow justifiable punishment for record profits, but if highly successful global companies take the view that the UK has become hostile they will simply move their operations elsewhere," he said.

"Politicians of all parties should publicly applaud companies making profits for Britain, employing more people, restoring the value of pension funds and paying tax to fund schools and hospitals.

"Business has also been disturbed by the approaches from some government departments for 'voluntary funding' to tackle various social issues.

"The alcoholic drinks industry, food industry and gaming industry are among those to have been targeted in this way.

"When accompanied by threats of regulation or a compulsory levy this is no better than taxation via the back door."