George Osborne’s £50bn boost for UK economy

By SHÂN ROSS
Published on 18/07/2012 00:35

THE government will underwrite up to £50 billion of investment in UK infrastructure and exports, under radical plans 
unveiled by Chancellor George Osborne today.

Mr Osborne said he was using the coalition’s “hard won fiscal credibility” to free up private-sector funds and kick-start the economy.

The huge initiative comes amid mounting pressure on ministers to support UK plc by loosening the purse strings. 
Earlier this week the IMF again cut the country’s growth forecasts to just 0.2 per cent for 2012.

However, the move will fuel criticism that taxpayers are taking on liabilities that the private sector considers too risky.

Under the UK Guarantees scheme, up to £40bn of funding will be underwritten for critical infrastructure projects that have stalled due to difficulties raising money from private investors.

The government will charge for helping secure finance for the projects, which could be in sectors such as transport, energy and communications.

Applicants will have to meet criteria including being ready to start construction within 12 months, having a positive impact on economic growth, and giving good value for the taxpayer.

The first guarantees are expected to be made in the autumn.

The government will also step in to ensure major Public Private Partnership (PPP) projects are not delayed.

PPP schemes get all their up-front funding from the private sector.

But for the next year the state will lend up to £6bn to some 30 projects as an “exceptional response to difficult market conditions”.

The loans, funded from departmental capital budgets, will be made on commercial terms, and only for a minority of the overall project cost.

Mr Osborne and Treasury Chief Secretary Danny Alexander also announced a £5bn export refinancing facility would be launched later this year.

The sectors benefiting could include aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, and hospital construction and management services.

Mr 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.”

Liberal Democrat Mr 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.”