CBI chief protests over spending cuts

Business leaders yesterday threw their weight behind Cabinet ministers opposing Treasury cuts in capital projects to prevent further job losses.

After a two-hour meeting of the Cabinet committee, which is reviewing the public expenditure cuts, Howard Davies, the secretary-general of the CBI, and Lord Prior, the chairman of GEC, urged the Cabinet to listen to the pleas from industry.

Mr Davies protested at the secrecy surrounding the cutting exercise by the Cabinet committee, known as EDX. He said: 'People feel very frustrated at their lack of ability to make any impact on the public expenditure round.'

Lord Prior, a former Secretary of State for Employment, warned that cuts in infrastructure would be 'devastatingly bad' for British industry and could lead to increased social tensions. He urged the Cabinet committee, now reviewing the final round of public spending cuts, not to 'fall for the Treasury line' by accepting cuts which would cost more jobs.

'The danger is unemployment will get even more unacceptably high than it is already. This could provoke a serious social problem. The more the Government cuts public expenditure and capital projects, the more it increases public expenditure because of the effect on unemployment,' he said.

The threat to cut the pounds 2bn Jubilee Line extension through London's Docklands was 'very damaging' for industry because of the uncertainty it caused.

The remarks will strengthen the case being made by Michael Heseltine, President of the Board of Trade, and Kenneth Clarke, the Home Secretary, for revenue expenditure - including social security payments and public sector pay rises - to bear the brunt of the cuts, instead of capital schemes, such as hospital building and housing, which would revive the construction industry.

The committee, chaired by Norman Lamont, the Chancellor, has accelerated its meetings to try to reach the deadline for the Autumn Statement in the first week of November. It will meet again today with a further meeting tomorrow and more planned for next week. The committee is preparing radical cuts in social security benefits, which could involve legislation, but capital schemes, including the housing programme, roads and hospitals, face the axe.

Michael Portillo, Chief Secretary to the Treasury, has reminded his Cabinet colleagues that the pounds 244.5bn total for next year was the ceiling for spending, implying that the EDX committee may recommend going below that total to impress the markets.