Osborne urged to spend in Autumn Statement
CHANCELLOR George Osborne is today urged to invest £14bn in shovel-ready infrastructure projects to kickstart the UK economy.
A report by the Ernst & Young ITEM Club warns that cuts to capital spending have been too deep, damaging the recovery of the construction sector.
It argues Mr Osborne should use Wednesday’s Autumn Statement to commit to an additional £7bn of capital spending in each of the next two years which could add 0.5% in each year to GDP growth.
TheBusinessDesk.com is partnering with Ernst & Young to provide coverage and analysis of the Autumn Statement on Wednesday.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said: “The key to this policy is in finding projects for which all of the planning and logistics have already been completed, and where all that is missing is the funding to put the shovel in the ground.
“This could include numerous transport projects, in particular the roads, and also essential repair and maintenance work on our hospitals, schools and other public buildings.”
The report suggests the boost for capital spending should be allied to greater support for first-time buyers to aid the housing market.
Mr Osborne will speak on Wednesday in the wake of new figures from the Office of Budget Responsibility which are likely to make difficult reading for the Chancellor.
The Ernst & Young ITEM Club is forecasting the OBR will cut its growth forecasts for 2012 and 2013 to 1.2%, borrowing £8bn higher than forecast with public sector net debt likely to rise as a share of GDP between 2014 and 2016 rather than falling as Mr Osborne has pledged.
Recent high profile examples of tax avoidance will also mean the Chancellor’s statement is scrutinised for measures to tackle the issue.
Patrick Stevens, tax partner at Ernst & Young, said: “We aren’t expecting any substantial changes to the direction to tax policy in the Autumn Statement. However there are two areas where the Chancellor needs to set out his thinking. The first is tax avoidance, which has been the subject of intense media and political scrutiny in recent months. We are expecting to hear updates on the General Anti Abuse Rule (GAAR), the expansion of the disclosure regime, and the work being done by the OECD to review the international rules on profit shifting by multinational companies.
“The second big priority for the Government will be to demonstrate that ‘those with the broadest shoulders bear their fair share’ of tax. The Chancellor’s red box is likely to include restrictions in the annual pension contributions relief, and possible increases in the higher levels of stamp duty and Capital Gains Tax rates.”
TheBusinessDesk.com will be sending readers a summary of the main points of the Autumn Statement within minutes of the Chancellor speaking on Wednesday with analysis available through the afternoon.
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