Business groups have rounded on the coalition government, demanding infrastructure spend be maintained in the coming Comprehensive Spending Review to keep Britain competitive, where savage public sector cuts are expected.
The CBI led the demands, with its deputy director John Cridland urging the government to return capital spending to 2.25% of GDP as soon as possible.
The coalition has already adopted £2bn of cuts to infrastructure spend set out by the previous Labour government, including a £400M reduction in transport spend. This will reduce public sector capital spend to just 1.1% of GDP by 2014-15, Cridland said.
“Reducing spend on transport links might seem a politically saleable option,” he told an audience of the East of England’s business leaders, “but it’s just not in the country’s long-term interests.”
Cridland said transport spend was the lowest of all OECD countries between 2000 and 2007, when spending increased overall, so we start from a relatively low base relative to other countries.
While the CBI agrees with the overall strategy to reduce the country’s deficit, Cridland said for infrastructure, “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.”
Renewable energy group RenewableUK said that cutting £60M set aside for new ports infrastructure, needed to develop the offshore wind industry, could jeopardise 50,000 jobs and force manufacturers abroad.
Director of Policy at RenewableUK, Dr Gordon Edge, said: “This Government has pledged to be the greenest ever, committing itself to re-balancing the economy to create low carbon jobs and tackling the dual challenge of climate change and energy security.
“We have a once-in-a-generation opportunity to become a world-leader in offshore wind but if we fail to capitalise on the lead we have in this sector, those jobs will be lost to rival countries already competing with us to attract offshore wind manufacturers.
“We are urging the Government to make the important distinction between current spending and investment, as the infrastructure spending will ultimately deliver mass employment and business benefits at a local and regional level. We are looking at 50,000 jobs in wind turbine and component manufacturing over the next decade.”
A cross-party group of MPs has highlighted the issue in the commons, former Liberal Democrat leader Charles Kennedy, Labour MP Alan Whitehead and Tory Peter Aldous co-sponsoring an Early Day Motion in the House of Commons.
Charles Kennedy said: “I have always believed very strongly in the potential of renewables to rejuvenate the UK’s economy – particularly in old industrial areas, in which many of the ports eligible for this funding lie. The possibility of building our own home-grown industry should not be passed up.”
The ICE went further, saying spending on infrastructure should increase and follow the example of the US administration which proposed a £32bn investment and formation of a National Infrastructure Bank this week.
“The people of the UK need that same promise, after an assessment of UK infrastructure networks by our own country’s civil engineering experts, concluded that our overall infrastructure requires ‘significant attention’ with energy and local transport infrastructure grades as ‘at risk’.
“An estimated £40-50bn per annum will need to be channelled into our infrastructure. While much of this funding must come from the private sector, a mechanism is needed to attract the large volume of private investment required.
“We are confident the new Government recognises the scale of the challenge and hope this is reflected in the comprehensive spending review and plan for a Green Investment Bank,” said ICE director general Tom Foulkes.