Chancellor urged to invest £14bn in infrastructure

Government has been pressured to make a two-year £14bn investment in ‘shovel ready’ infrastructure projects by tax experts.

In their Autumn Statement recommendations, Ernst & Young ITEM Club claims that 0.5% a year could be added to GDP with such construction investment, improving the UK’s short-term economic growth in the face of – what it terms – excessively deep cuts to capital spending.

Infrastructure spending has dropped by £24bn since 2009/10, which, the report claims, has damaged the recovery of key sectors and reduced GDP by over 1.5%.

Ernst & Young ITEM Club has also urged the Treasury to expand the first buy home equity scheme and reinstate stamp duty holiday for first time buyers.

Ernst & Young ITEM Club expects that restrictions in the annual pension contributions relief and potential increases in the higher levels of stamp duty and Capital Gains Tax rates will be included in Wednesday’s Autumn Statement.

Discussing recommended infrastructure investment, 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.

‘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. The second big priority for the Government will be to demonstrate that “those with the broadest shoulders bear their fair share” of tax,’ Goodwin said.