Spending Review ‘must galvanise growth’

Published:  20 September, 2010

LONDON: The Confederation of British Industry has called on the Government to protect economic growth in its forthcoming Spending Review.

It made the call as it published its submission to the Treasury ahead of the Spending Review next month. The Government previously announced in the Budget that it will make £32bn of annual spending reductions by 2014-15.

John Cridland, CBI Deputy director-general, said: "The CBI agrees that government spending must be limited to avoid major tax rises that would damage our economy and undermine competitiveness. However, the Government must protect investment in areas that do most to foster economic growth while making savings by re-engineering public service delivery, reforming public sector pensions and reducing spending in other areas.

"The Government should therefore prioritise spending on investment in infrastructure; knowledge assets such as and research and development; and human capital through education and skills.

"The Government must improve the efficiency of public services and focus the limited public money available on areas that do most to galvanise growth."

The CBI said three areas of investment must be prioritised: infrastructure investment; knowledge assets and human capital.

As well as direct Government investment, barriers to private sector investment in energy and communications infrastructure also need to be addressed. For example, by simplifying the planning regime. The CBI is calling for:

Public sector capital investment to be returned to 2.25% of GDP as soon as possible.

Existing transport assets to be maintained.

Work on Crossrail and upgrades to the London Underground network to continue.

Savings on existing transport spending, including reducing the concessionary fares budget and the number of Highways Agency contracts.

All public sector transport projects to undergo more rigorous value for money assessments.

Action to attract more private sector funding for transport.

An increase in the number of employer-led apprenticeship places.

Ian McCafferty, CBI chief economic adviser, commented: "Cuts will necessarily affect GDP growth in the short term, but smart choices will give the economy the ability to grow. The Government must use its limited resources to support a healthy private sector recovery so it can pick up the slack from the public sector.

"The planned cuts to net public sector investment are a concern. Public sector capital investment should be returned to 2.25% of GDP as soon as possible. We also need to invest in building up our knowledge and skills base as this will help boost our competitiveness."

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