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2011-11-29 11:15:00
Chancellor George Osborne plans to attract billions of pounds from British
pension funds to boost 30bn worth of infrastructure schemes.
The government is expected to provide 5bn of the money by 2014-15 while it is
"targeting" 20bn to come from big British funds.
But the Institute for Fiscal Studies said the 5bn figure was "pretty small"
compared with cuts to capital spending.
It comes as the OECD forecasts the UK is likely to slip back into recession.
The OECD, an economic think tank, said the UK's GDP would shrink in the final
quarter of 2011 and the first quarter of 2012 - if the economy shrinks for two
quarters in a row it is officially said to be in recession.
The infrastructure announcement comes ahead of Tuesday's Autumn Statement in
which Chancellor George Osborne will outline spending plans.
The aim is for government and private investors to support both social and
economic schemes over the coming decade. The government will provide 5bn up to
2015-15, then a further 5bn in the next Parliament.
Start Quote
We are finding the resources in difficult times to build the railways, to build
the roads
George Osborne Chancellor
OECD warns of European recession
Stephanie Flanders: Osborne, Balls and the OECD
The Treasury hopes two-thirds of the 30bn earmarked for infrastructure schemes
will come from the National Association of Pension Funds and the Pension
Protection Fund. Separately it is also seeking more investment in
infrastructure from insurance companies and from China.
Chancellor George Osborne said: "We are finding the resources in difficult
times to build the railways, to build the roads. Britain's got to get away from
the quick-fix debt solutions that got us into this mess.
"We have got to weather the current economic storm and we have got to lay the
foundations for a stronger economic future.
"We have got to make sure that British savings in things like pension funds are
employed here and British taxpayers' money is well used."
About 5bn will be provided in the next two to three years, and a further 25bn
allocated in the long-term, ministers say. Some of the money will come from
areas where there have been "under-spends" in government, including the carbon
capture and storage negotiations, and a crack-down on tax avoidance.
Start Quote
They're giving with one hand and taking with another - I don't think that's
going to be the thing that gets our economy moving
Ed Miliband Labour leader
The 40 highlighted projects for support from the plan include the Transpennine
Express line between Leeds and Manchester, the Metro system in Tyne and Wear as
well as improvements to the M25, M3 and M56.
But Paul Johnson, director of the Institute for Fiscal Studies, told BBC Radio
4's World at One that 5bn of government investment over three years was a
"pretty small number", as capital spending was expected to be cut from 40bn in
2010-11, to 24bn in 2013-14.
The money raised from private investors appeared to be "aspirational" rather
than guaranteed - unless the government was planning to offer incentives, which
might turn out to be expensive.
Business Secretary Vince Cable said they were not planning incentives - but
would offer long-term investors assurances and clarity about a "steady return"
on their money: "We will create an environment in which that can happen."
Spending cuts
Asked about the OECD report, the Lib Dem cabinet minister said a double dip
recession was "certainly possible" - but said the think tank's "best estimate"
was there would be some growth in the UK economy next year - "not very much but
some - about the same as Germany, considerably better than France and southern
Europe".
He said the government was "obviously" doing contingency planning - but had to
operate on a "plausible set of assumptions", which would be set out by the
Office for Budget Responsibility on Tuesday. And he said slowing down spending
cuts was not part of the plans: "There isn't any proposal to go along that
line."
Labour leader Ed Miliband said the government was not doing enough to get the
economy back on track: "We can do something about that - cut VAT to put more
money in people's pockets so we can actually get our economy moving again.
"Have a bank bonus tax to put the young unemployed back into work, not cutting
tax credits - robbing Peter to pay Paul. And that's what the government seems
to be doing - any changes they're making are being offset by changes elsewhere.
In other words they're giving with one hand and taking with another - I don't
think that's going to be the thing that gets our economy moving."
The TUC has issued its own economic plan, which contains measures including
cutting VAT, reversing the public sector wage freeze and giving a one-off
increase in child benefits before Christmas.
TUC general secretary Brendan Barber said: "The chancellor's economic plan A
has sent unemployment to a 17-year high and the UK's economic outlook is the
gloomiest it's been since the end of the recession."
Infrastructure projects
Map: Infrastructure projects likely to receive funding
North West: M56 at Manchester Airport, linking the M56 at Manchester airport to
the A6 south of Stockport, expected to improve access to Manchester Airport,
and the Airport Enterprise Zone, from the East, including Derbyshire
Transpennine Express - The government is supporting Network Rail in
electrifying the north-Transpennine route between Manchester and Leeds. It will
cut journey times between Liverpool and Newcastle by 45 minutes
North East: Tyne and Wear metro - the government wants to "accelerate the
development" of the metro
South West: Kingskerswell bypass - additional funding for the bypass in Devon
West Midlands: A45/46 Tollbar End - improvement scheme to provide relief from
congestion, improve journey times, and improve the capacity of the Tollbar End
roundabout and the A45 Stonebridge Highway
South East: M3 (J2-3) in Surrey - additional funding to use the hard shoulder
to increase the capacity on the M3 in Surrey
East of England: A14 in Cambridgeshire -programme to reduce congestion on the
A14, including measures to improve junctions and increase resilience
East Midlands: A14 Kettering Bypass - additional funding to widen the bypass
between junction 7 and 9, to reduce congestion
Yorkshire and Humber: Humber Bridge - the Government will write down the debt
on the Humber Bridge, which will allow the toll on the bridge to be reduced by
half
London: M25 junction 23 to 27 scheme - new investment to accelerate the current
managed motorway scheme which will use the hard shoulder to increase capacity
Northern line extension to Battersea - government support for the extension and
it will consider allowing local authority borrowing against the Community
Infrastructure Levy to support this, subject to a commitment from a developer
to contribute and develop the site