By Claire West

Ahead of the Spending Review, the Institute of Directors (IoD) would like to express its concern that the Government’s approach to spending reduction is not sufficiently focussed on long-term growth. The wrong areas of public spending are being ring-fenced. Infrastructure spending should be protected — not the NHS and international development spending.

Key Points:

•The Government’s overall objective of reducing the deficit with a heavy emphasis on spending cuts rather than tax hikes is absolutely right. However, there are good and bad ways to lower public spending.

•Ring fencing NHS and international development spending is a mistake — the priority should be to protect strategically important transport, energy and IT infrastructure spending. This would help short-term demand and, more importantly, boost the supply side of the economy in the long-term.

• The IoD is concerned that the UK’s already creaking infrastructure is going to suffer further because of the Coalition’s ‘salami slicing’ approach to cutting the deficit.

Commenting, Miles Templeman, Director-General of the IoD, said:

“The right way to help short-term aggregate demand and boost long term aggregate supply is to protect infrastructure spending. Unfortunately the June Budget proposes to halve public sector investment. We urge the Government to revisit this decision in the Spending Review.”

He added:

“We are concerned that the Coalition seems determined to ring fence NHS and international development spending. This is a political calculation and an economic mistake. Although uncomfortable, the Government should revisit this decision too.”