LONDON (Reuters) - The government needs to cut day-to-day spending more deeply in order to spur longer-term investment and get the economy growing more quickly, the head of the Confederation of British Industry said.
The British economy will probably grow by just 1 percent in 2013, underscoring the need for the government to work harder on boosting investment, John Cridland, director-general of the CBI, said.
“The government’s efforts have not had the momentum or the urgency that I have been looking for,” he told reporters.
Cridland said he would make the case for more focus on capital spending, on areas such as road repairs and housing, when he meets Chancellor George Osborne ahead of his announcement of the next budget in March.
“Public sector capital has borne the most significant part of the cuts so far. We would like to see that rebalanced. I think that should come out of current spending,” he said.
Osborne has staked his political reputation on largely eliminating a budget deficit that totalled more than 12 percent of GDP when he came to power, but a lack of economic growth has pushed his plans two years off track.
Cridland said the government’s overall focus on reducing the budget deficit remained the right approach and it should not be tempted to issue more debt to fund investment.
This contrasts with the views of the Labour opposition and the International Monetary Fund that economic weakness means Osborne should seriously consider slowing his debt reduction plans to fund public investment.
Cridland said he was encouraged by signs the government would issue more guarantees for private-sector infrastructure projects. Such projects have included new railway lines to ease the crush on London’s public transport.
The forecast for 1 percent economic growth this year was lower than the CBI’s prediction for growth of 1.4 percent made as recently as November, before the British economy was shown to have contracted in the fourth quarter of 2012.
The lower growth forecast for 2013 meant the government would have to borrow more this year than previously expected.
The CBI kept unchanged its forecast for British economic growth of 2 percent in 2014.
Reporting by William Schomberg; Editing by Hugh Lawson