UK government to underwrite projects

Chancellor George Osborne (pictured) has announced a plan for the government to underwrite up to £40bn of investment into UK infrastructure. The move aims to kick-start infrastructure projects put on hold for a lack of funding.

UK Chancellor George Osborne has announced the launch of a new guarantees scheme for infrastructure projects whereby up to £40 billion (€51 billion; $62 billion) of funding will be underwritten in projects that have been put on hold as a result of difficulty raising money from private sources.

Those projects seeking money from the new scheme will have to demonstrate that work can begin within 12 months, that they will have a positive impact on economic growth and that they will provide good value for money for taxpayers. The government said it hoped the first guarantees would be made in the autumn of this year.

The BBC said the government is planning to provide around £6 billion for around 30 planned public-private partnership (PPP) projects which are struggling to get off the ground because of difficulties securing funding.

UK business organisation the CBI welcomed the move. Director 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.”

He added: “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.”

The opposition Labour party was less impressed. Shadow chief secretary to the Treasury Rachel Reeves told the BBC: “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.”

In November last year, the UK government unveiled a £250 billion National Infrastructure Plan – a decade-plus roadmap of 500 infrastructure projects across the road, rail, energy and broadband sectors among others.

The plan included a list of priority projects to be developed in the short to medium term, with the government hoping the private sector will pick up the tab for “almost two thirds of the expected investment between 2011 and 2015”.