Capital spending boost not enough to kick-start economic recovery, warns TUC

date: 19 March 2013

embargo: For immediate release

Commenting on reports today (Tuesday) that the Chancellor will cut departmental spending by £2.5bn to fund new infrastructure projects, TUC General Secretary Frances O'Grady said:

'With the economy stagnating, the pressure is on the Chancellor to deliver a pro-growth Budget.

'But spending just £2.5bn a year more on infrastructure projects will boost growth by a measly 0.06 per cent. Worse still, funding it through departmental spending cuts will mean further reductions in public services.

'With interest rates negative in real terms, the Chancellor has the perfect opportunity to invest in Britain's future, rather than raiding departmental budgets to cover his failed economic strategy.'

NOTES TO EDITORS:

- According to the Office for Budget Responsibility, current spending has a fiscal multiplier of

0.6, compared to a multiplier of 1 for capital spending. The increase in capital spending increases GDP by 2.5bn but the current spending cuts reduces it by £1.5bn. The net increase of £1b is equivalent to 0.06 per cent of GDP.

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