Cut public sector pay not infrastructure, says CBI

13 Jun 13
Business leaders have called on Chancellor George Osborne to restrain public sector pay, ending automatic salary increases based on tenure.

By Richard Johnstone | 13 June 2013

Business leaders have called on Chancellor George Osborne to restrain public sector pay, ending automatic salary increases based on tenure.

In a submission to the Treasury ahead of the June 26 Spending Review, the CBI urged the government to ‘not flinch from bold public service reforms’ as it continued to implement the deficit reduction plan.

The CBI said further savings could be made, including ‘strategic changes’ to public sector pay. Use of freezes and caps were reaching their limit in controlling the overall pay bill, the group said, but other reforms could tackle ‘underlying issues’. It called in particular for the scrapping of automatic salary increases based on tenure. The government should also move away from determining annual pay awards to managing the overall pay bill, including identifying Whitehall functions that could be wound down.

In addition, social care spending should be integrated into the NHS budget, which could lead to ‘additional savings’ of up to £3.4bn a year through efficiencies.

Infrastructure spending should not be reduced, CBI director general John Cridland said, as this was vital to supporting the UK’s ‘fledgling’ economic recovery.

He added that cuts in the current Spending Review period to the end of 2014/15 were restricting important projects and Osborne must not ‘repeat the mistake’ for 2015/16.

Supporting infrastructure development must be the ‘top priority’ and the government should take short-term action to improve roads and boost house building, as well as outline a longer-term plan to get a ‘pipeline’ of initiatives unde way. A set of ‘flagship’ schemes should be prioritised in the review.

‘If the government doesn’t act now, even less infrastructure could be built in the years ahead, as cuts from the last spending round continue to feed through and decisions on major projects remain up in the air,’ Cridland said.

‘The message from companies is clear: there is no shortage of capital available to invest in UK infrastructure, but we’re stuck in a catch-22 as investors wait for contractors to start projects, contractors wait for government decisions and ministers try to attract investors. The deadlock can only be broken by strong leadership and bold decisions from all sides.’

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