23 November 2001
Research by the respected think-tank shows that public capital spending as a proportion of national income has fallen to a post-war low in the years since Labour won power. In 1999 it was just 1.6% of GDP. By contrast, the 1975 level was 8.9%.
The government's controversial policy of encouraging private sector involvement in the public services has so far done little to boost investment, according to the report's author Sarah Love. 'Even if PFI capital expenditure is counted as public spending, the public investment rates seen over the years 1997 to 2000 remain lower than at any time since the Second World War,' she said.
Unison general secretary Dave Prentis told Public Finance that the IFS research endorsed the union's concerns about public spending.
'Even doubling spending levels will not be enough if you are starting from such a low base. The chancellor needs to be more ambitious and double that again in the Spending Review next year,' he said. 'PFI is a very expensive, slow and bureaucratic way of financing public investment.'
According to the IFS, falling investment levels can partly be explained by widespread privatisation of national assets, such as the utility companies, and the massive reduction in council housing. Investment in these areas is no longer the responsibility of the state.
But the report concluded that since 1991 there had been a 'genuine reduction' in investment levels.
A spokesman for the Treasury said the study had not taken into account the recession of the early 1990s, which meant that investment was being compared with a low GDP. 'The government has set out to double investment in real terms between 2001 and 2003/04,' he added. 'You just have to look at what's going on on the ground to see the effects of that.'
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