CBI fears cuts in infrastructure spending

The CBI will warn the government today that it is repeating past mistakes by neglecting infrastructure investment in its comprehensive spending review.

A statement from the Confederation of British Industry revealed the content of a speech to be made by John Cridland, the CBI’s deputy director-general, to businesses in the East of England today.

In the speech Cridland will say that the UK already lags well behind its competitors in its spending on infrastructure, such as roads and rail. He will also point out that, in the years when government spending rose between 2000 and 2007, the UK’s investment in transport was the lowest of all OECD countries.

Cridland will comment on the chancellor’s decision to adopt significant cuts in future spending already set out by the previous government and to reduce in-year infrastructure spending by £2bn. This will include £400m on transport, and bring public sector capital spend down to 1.1% of GDP by 2014-15.

Cridland will say: “An apparent saving today means spending more tomorrow, and fails to recognise the direct and indirect benefits that quality infrastructure can bring in the near term. Analysis shows that the ‘multiplier effect’ of investment in infrastructure is much greater than in other sectors. The economic case for targeted new infrastructure remains robust.”

Looking ahead to the forthcoming CSR, where the government will set out in detail how it plans to take action to reduce the budget deficit, he will say: “We accept the need for cuts, and we’d expect any special pleading to be given the short shrift it deserves. There needs to be a robust case for spending of any sort, and especially in the current fiscal climate. But just as we’re absolutely sure about the need to reduce the deficit, there’s also a certainty that failing to prioritise infrastructure spending in the CSR would be short-sighted in the extreme.

“The UK’s infrastructure is poor by international standards and is a serious barrier to greater efficiency and to economic growth. Put simply, balancing the Government’s books is going to need improved infrastructure, and doing it on the cheap would be a false economy. Infrastructure investment can contribute to the urgent task of reducing the deficit if there is a relentless drive for more value for money in the way it is delivered, as is being demonstrated by Crossrail.”