By Daniel Hunter
The CBI is calling on the Chancellor to take urgent steps to galvanise infrastructure investment in this month’s spending round, warning that failure to act will put the fledgling recovery at risk.
The UK’s leading business group is warning that even less infrastructure could be built in the years ahead, if private investment is stifled by the lack of a project pipeline and government’s slow pace on taking big decisions - all this as previous spending cuts from 2010 continue to filter through. It is urging the Chancellor not to repeat the mistakes of the last spending round, and further increase infrastructure spending.
To bridge the investment gap, the CBI is calling for short-term action on improving roads; boosting house-building and getting a pipeline of major projects moving.
Underlining the importance of fiscal consolidation, the CBI’s submission to the Chancellor identifies areas where substantial savings could be made if the Government takes a much bolder approach to public service reform. They include reducing automatic pay rises across the public sector and integrating social care spending into the NHS budget.
John Cridland, CBI Director-General, said: “With more than half of government spending ring-fenced and £11.5bn of cuts required, the Government has to walk a tightrope of making substantial savings, without harming fragile growth.
“The Chancellor must prioritise areas that could propel a fledgling recovery and infrastructure investment should be in pole position.
“If the Government doesn’t act now even less infrastructure could be built in the years ahead, as cuts from the last spending round continue to feed through and decisions on major projects remain up in the air.
“To bridge the gap, the Chancellor needs to press ahead with short-term action to improve roads and boost the supply of housing. He also needs to identify a pipeline of transformational projects and make sure their red ribbons are cut at the earliest opportunity.
“Meanwhile ring-fencing cannot be used as a convenient shield, protecting some departments from essential financial discipline and the Government must not flinch from bold public service reform.”
On infrastructure: The UK is currently ranked 24th for infrastructure by the World Economic Forum, behind Saudi Arabia and Barbados, so the urgent need for action remains.
The CBI is calling for:
· The Government to select flagship projects to prioritise — for example, expansion of the A14 connecting Felixstowe Port, the M4 relief road and improving surface access to airports
· Cross-party manifesto pledges to accept findings of the Davies Commission on aviation capacity in 2015
· Clarity over the next investment cycle for the Affordable Homes Programme
· An extension of the duration of government guarantee schemes to boost private sector investment
· Maintaining focus of Repair, Maintenance and Improvement schemes for roads to bridge the gap before larger projects reach construction.
Mr Cridland said: “The message from companies is clear: there is no shortage of capital available to invest in UK infrastructure, but we’re stuck in a catch-22 as investors wait for contractors to start projects, contractors wait for government decisions and ministers try to attract investors.
“The deadlock can only be broken by strong leadership and bold decisions from all sides. We need genuine political and public consensus on what infrastructure we need, who should deliver it and how it should be paid for.
“Politicians outsourced the critical decision on expanding aviation capacity to the Davies Commission, so we need to see cross-party manifesto commitments to accept its independent recommendations in 2015.”
Additional savings through public service reform:
The CBI has identified where further significant savings could be made through radical public services reform in 2015/16. It is calling on the Government to:
· Integrate social care spending into the NHS budget
· Consider removing automatic salary increases based on tenure in the public sector
· Identify contracts and work-streams which could be outsourced to deliver savings, like the management of the governmentestate which could potentially save £800m per year by 2020
· Ensure greater sharing of services across Whitehall and local authorities by 2020 which could save between £400m and £600m
· Open up the prison, probation and the rehabilitation services market, following private sector successes in prison management services.
Mr Cridland said: “Ring-fencing makes life a little more difficult for the Chancellor and so he must start looking at areas where opening up existing markets to fresh thinking and new ideas could improve delivery, like outsourcing management of the Government estate.
“Shared services should become the norm and the default option for Whitehall and local authorities by 2020.”
Other growth boosting measures:
The CBI is calling for support for energy intensive industries, funding for skills, and investment in growing and innovative businesses, including:
· The extension of the Energy Intensive Industries support package which should be linked to the Carbon Price Floor
· Support for maintaining current funding for the Technology Strategy Board (TSB) and increasing this if possible, as the TSB has been underfunded to date and is crucial to successfully protect innovation in the UK
· A new skills tax credit to invest in our future workforce and boost productivity
· Continued support for UK Trade and Investment’s budget to boost growing and ambitious UK exporters.
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