CBI warns on capital spending

PAUL WALLACE

Economics Editor

As the Chancellor and his Treasury team gather at Dorneywood today for a key Budget strategy meeting, business leaders have warned Kenneth Clarke not to axe capital projects to pay for tax cuts.

"We are worried about a strategy for the Budget which involves significant cuts in capital expenditure to pay for tax cuts," said Adair Turner, director- general of the Confederation of British Industry. "The government has to be very careful of action that is in danger of causing a major setback in the construction industry."

"The danger is that once again they will mortgage the future to pay for short-term tax cuts," said Sir John Banham, chairman of Tarmac and a former CBI director-general.

A particular concern is that the government may slash capital spending programmes under the guise of a further expansion of the Private Finance Initiative. The PFI, which was launched in 1992, aims to get the private sector to finance capital projects which were formerly undertaken only by government.

The CBI is in favour of the PFI, but Mr Turner said that "we are very wary about the argument that the PFI can fill the gap because our members tell us there are teething problems." He added that "there was a worry about counting chickens before they're hatched".

Progress with the PFI has been modest to date, with only pounds 500m invested up till the end of the last financial year, 1994/5. The Government has said, however, that it expects to let contracts this year leading to around pounds 5bn of capital investment, of which nearly pounds 3bn is the channel tunnel rail link.

According to Douglas Hogg, chief executive of the Private Finance Panel - set up in 1994 after criticism of the scheme's lack of progress - the PFI has achieved considerable momentum. He pointed to over 500 projects in the pipeline for the health service worth pounds 2bn. But few of these schemes have yet produced any actual expenditure - only pounds 100m of capital spending has resulted in the health service so far.

CBI members say that there is a gap in capital expenditure before the PFI "kicks in." And one City financier involved in the schemes said that the Treasury is cutting back on public investment before projects funded through the scheme actually materialise. Gross public investment is already projected to fall by 10 per cent next year from its level in 1994/5.

Comment, above

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
News
news
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
i100
Arts and Entertainment
tvChristmas special reviewed
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all