"One of our great challenges is coping with short-term financial planning while delivering projects which can take 10 years to complete," said ICE president David Orr.
"This is a recipe for stop-start programming -- not only frustrating for the public but also wasteful of time and effort."
The reasoning relates to proposals in the Planning Reform Bill, currently making its way through Parliament, for the publication of national policy statements for highways, energy, water and other key infrastructure networks.
The Bill will establish an Independent Infrastructure Planning Commission to fast-track the planning process for major schemes that meet the objectives of the national policy statements.
But the State of the Nation report urges the Government to go further by setting up a body that can agree long term infrastructure plans across spending departments.
"We need new political structures that prevent stop-start procurement and bring to an end the kind of short-term decision-making that ultimately costs the UK dearly," says the report.
"Ministers, although formally accountable to Parliament, remain free to make short-term decisions to cut spending which can have negative long-term impacts for the country's economic and environmental performance."
The report says the lack of predictability and the often seemingly arbitrary reasoning behind these decisions creates a climate of uncertainty which both hinders effective long-term planning and stunts innovation.
The report cites the example of the budget for the Environment Agency flood risk management in England and Wales, which fell by around £80M in 2006.
"The cut was one of many forced on its agencies by the Department for Environment Food and Rural Affairs (Defra) as a result of the Department's problems in funding the Single Farm Payments Scheme," says the report.
"Flood defences lost out because of problems in farming," it says.
The ICE says the national infrastructure body would "work with all stakeholders to deliver improved co-ordination and predictability of the government's infrastructure investment programme."
It would also "deliver regular and high-profile reporting of progress against the programme, holding government and industry to account, identifying capacity bottlenecks [and] cost constraints."