Osborne starts major projects with £40bn UK guarantee

Aaron Morby 10 years ago
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Chancellor George Osborne launched a package of measures today to get Britain building stalled major infrastructure projects.

The central measure is a UK guarantee designed to underwrite financing for £40bn of stalled projects within the National Infrastructure Plan.

The chancellor said “applications are open today to kick start critical infrastructure projects that may have stalled because of adverse credit conditions.”

He also released £6bn in temporary Government loans to ensure around 30 public-private partnership infrastructure projects can go ahead.

The new UK loan guarantees and lending for big building projects follow months of criticism that the government has failed to generate jobs and growth.

The Government will now use its balance sheet to shoulder major project risk by offering guarantees for projects that are ready or nearly ready, with the first expected to be awarded in the autumn.

To qualify, projects must be ready to start within 12 months, and project promoters can apply for help from today.

As well as infrastructure projects, the loans will also be available for housing, health and education projects.

A third strand of the stimulus package will be a £5bn scheme to support British exporters by ensuring overseas buyers have the long-term funding they require.

Osborne said: “The credibility the Government has earned through tackling the deficit is already helping millions of British families and businesses through keeping down the cost of borrowing.

“Now ‘UK Guarantees’ will use that hard-won fiscal credibility to provide public guarantees of up to £50bn of private investment in infrastructure and exports.

“Britain’s credibility has been hard-won and involved difficult decisions, so I want to make sure its benefits are passed on to the whole economy.”

The Chief Secretary to the Treasury, the Rt Hon Danny Alexander said: “The measures we’re announcing today will help work get started on many important infrastructure projects and help our major exporters, providing lasting benefits for thousands of people and a significant boost to the economy.

“This is yet another example of the Coalition working together to put its hard-earned economic credibility to work to increase growth. “

Shadow chief treasury secretary Rachel Reeves said: “These proposals do not go far enough. There is no guarantee that government-backed loans will see any infrastructure projects going ahead in the next year which wouldn’t have happened anyway.

“And they will not reverse the damage done by two years of deep cuts to long-term projects like house building and the school building programme which have seen a collapse in the construction sector.”

The announcement was welcomed by CBI chiefs who have been calling for action on infrastructure investment.

Drector General John Cridland said: “This announcement marks a big step towards unlocking the £250 billion of investment needed to renew our national infrastructure, two-thirds of which has to come from the private sector.

“The Government has produced a package of measures that will use the public balance sheet to underwrite private finance, building on the ideas put forward by business.

“With bank lending still constrained, we must make it attractive for new finance providers to step in and fill the gap.

“A combination of direct lending and loan guarantees should help to make infrastructure assets more attractive while protecting our fiscal position.

“Pension funds and other investors will be encouraged by the Government’s attempt to reduce risk by using its funding power to boost the investment grade of a range of projects.

“While the Government’s proposals address infrastructure financing, we now need to focus on project models to ensure delivery of the world-class infrastructure this country needs.”

CECA director of external affairs Alasdair Reisner said: “The government’s ‘UK Guarantees’ scheme could potentially unlock projects where there is a confidence gap preventing private sector investment in infrastructure.

“However, it remains to be seen whether this will actually attract new investment in infrastructure, thereby supporting increased output in the sector.

“CECA looks forward to hearing more detail on which projects the UK Guarantees scheme will enable to move forward within the year-long timeframe the Chancellor has set.

“We welcome any steps that the government can take to provide a catalyst to infrastructure provision to kick-start growth in the economy. However, it important that we do not seek to portray the UK Guarantee scheme as a ‘silver bullet’ that will solve the challenges facing the industry over the coming years.

“CECA believes that only by working closely with industry to unblock stalled projects, enable targeted investment and adopt innovative models of infrastructure financing will the government achieve the targets it has set in addressing the infrastructure deficit the UK faces over the next decade.”

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