Employers urge Government to spend on research

The employers' organisation said that while public expenditure has to be limited to avoid major tax rises, the Government should make sure investment continues in areas that are key to economic growth.

The Confederation of British Industry also said the Government should make savings by re-engineering public service delivery, reforming public sector pensions and cutting unnecessary spending.

The Government is preparing plans to make 32bn of annual spending reductions by the end of 2015.

John Cridland, CBI deputy director-general, said: "The Government rightly decided to limit public spending. The alternative would have been tax rises and other consequences that would have damaged the economy for years to come.

"Cutting spending means tough choices. We think that the need for economic growth, not the noise of the loudest voice, should determine where cuts are made. The Government must improve the efficiency of public services and focus the limited public money available on areas that do most to galvanise growth."

In a wishlist submitted to the Treasury, the CBI said transport investment was crucial because it offered high returns and would play a vital role in boosting domestic and international trade.

Among other suggestions was a call for public sector capital investment to be returned to 2.25 per cent of Gross Domestic Product as soon as possible.

The organisation also urged Ministers to lift barriers to private sector investment in energy and communications infrastructure, such as simplifying the planning regime.

The CBI said the government must ensure investment in "knowledge assets", such as coordinating research and development spending across departments and refocusing regional innovation support.

On human capital, the organisation said the Government could help to encourage business-relevant research by maintaining certain funding. It also suggested a scaling back of the Train to Gain scheme for larger employers, with funding focused on smaller firms, and an increased focus on skills in science, technology and maths.

Ian McCafferty, CBI chief economic adviser, said: "Cuts will necessarily affect GDP growth in the short term, but smart choices will give the economy the ability to grow."