CBI urges government to spend on infrastructure

The government must prioritise its spending on investment in infrastructure, research and development, and education and skills, the CBI has said.

In its submission to the Treasury’s comprehensive spending review, the business group said the government was right to limit spending.

But it added: “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 CBI also said:

• Investment in transport infrastructure would offer high returns and play a crucial role in boosting domestic and international trade
• The planning regime should be simplified as part of a drive to remove barriers to energy and communications infrastructure
• Public sector capital investment should be returned to 2.2% of GDP “as soon as possible”
• All public sector transport projects should undergo more rigorous value for money assessments
• Existing transport assets should be maintained
• Savings should be made on existing transport spending, including a reduction in the concessionary fares budget and the number of Highways Agency contracts.

The CBI argued that there should be increased competition in the public sector “to assist in driving down costs”. It reiterated its previous calls for private and third sector providers to be able to compete with existing public service providers on a level playing field, for procurement processes to be improved, and for greater transparency in public service contracts.

The business group also claimed that the public sector should be “put on to a sustainable footing by tackling unfunded liabilities, such as public sector pensions”. The management of public sector pension schemes could be improved, it suggested, while consideration should be given to moving public sector workers to a defined contribution pension scheme.

John Cridland, CBI Deputy Director-General, said: “The government rightly decided to limit public spending. The alternative would have been tax rises and other consequences that would have damaged the economy for years to come.

“Cutting spending means tough choices. We think that the need for economic growth, not the noise of the loudest voice, should determine where cuts are made. The government must improve the efficiency of public services and focus the limited public money available on areas that do most to galvanise growth.”