The Institute of Directors (IoD), a UK lobbying group with 45,000 members representing the interests of the business community, has called for public spending on infrastructure to be ring-fenced “because of the positive effects this type of expenditure has on economic growth”.
The call comes ahead of the UK general election on May 6, in which the level of public expenditure is a key theme given the enormous public sector deficit. According to the Office for National Statistics, the UK’s public sector net debt stood at £857.5 billion (€977.6 billion; $1.33 trillion) in February 2010 compared with £712.4 billion a year earlier.
In order to assist with what is estimated to be a £500 billion infrastructure requirement over the next ten years, the IoD has called for “radical financing solutions”. These include using the proceeds from the sales of bank privatisations. As part of a move to prop up the banks in the wake of the financial crisis, the UK’s Labour government currently owns stakes of 84 percent in Royal Bank of Scotland and 41 percent in Lloyds Banking Group – an “orderly exit” from which has always been the government’s stated intention. The IoD reckons these sales could fetch at least £50 billion.
In a statement, Graeme Leach, chief economist and director of policy at the IoD said: “The challenge for the next government is to find the necessary finance to deliver public infrastructure. Given the scale of the public deficit, new and radical ways of incentivising private sector investment need to be found.”