The next important decision Mr Osborne must make is what balance to strike between current and capital spending, on roads and rail and the like. Mr Darling had already pencilled in investment cuts worth 1.5% of GDP. This seems excessive, repeating the mistake often made in the past of slashing capital spending when times are hard; this has left the country with a poor transport system, for example. For Britain to emerge from its fiscal crisis not only must the deficit shrink but the economy must grow, and this means adequate infrastructure. The government might want to cut net investment by no more than 1% of GDP. That, in turn, would mean reducing current departmental spending by around 2.6% of GDP.
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