Shovel ready projects are path to short term growth argues Ernst & Young as CBI calls for repairs and maintenance boost

Wonders and blunders

Analyst Ernst & Young has said the government should spend an extra £14bn on infrastructure projects over the next two years to boost the economy

In a report ahead of the chancellor’s Autumn Statement on Wednesday the firm said the government should finance shovel ready projects such as road schemes and repair and maintenance work on hospitals, schools and other public buildings.

It said support of this kind would drive an extra 0.5 percentage points of growth in gross domestic product in both 2013-14 and 2014-15.

The report said that cuts to capital spending by the government had been “unnecessarily deep” and had been “particularly damaging” to the construction sector. It added that the Eurozone crisis would see growth forecasts for the next two financial years slashed.

It branded the government’s attempt to encourage pension funds and insurers to finance infrastructure a “failure”.

The call for infrastructure spending was echoed in the Confederation of British Industry’s submission to the Chancellor which said the government should use £1.5bn from under spending in last year’s budget and the auction of 4G telecommunications bandwidth, to pay for projects.

It highlighted local government spending on road maintenance; incentivising take-up of the Green Deal; and a new capital allowance incentive for infrastructure investment, as areas ripe for spending.

Ernst & Young also highlighted the housing market as as an area in need of government support.

It added that the government’s Funding for Lending Scheme, which offers banks access to government money in exchange for increased lending to house buyers, looked likely to provide a positive stimulus to the housing market.

But it also argued reintroducing a stamp duty holiday for first time buyers would further boost the market.