Pension funds urged to join £30bn infrastructure plan


George Osborne: "We are finding the resources in difficult times"

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”

End Quote George Osborne Chancellor

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”

End Quote 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

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  • rate this

    Comment number 129.

    Great news for south Devon &torbay. Thanks to David and george. Glad I voted cons.

  • rate this

    Comment number 128.

    Reply to free market zen. In 1945 the wages were about £3 pw. The wages now are about £300. The money was in the Banks, tills and Pockets. It has increased by at least a hundredfold. The same for the rest of the world. Where do you think that money came from? Actually, increasing the money supply each year has produced an untold number of jobs both here and abroad. It is not a debt.

  • rate this

    Comment number 127.

    why cant we just admit that the system is broken and has to change.rumours of an imf bailout and the price of oil shoots up, more misery for most of us .take the pain let defaults happen, assets will find their true value and activity will pick up eventually.

  • rate this

    Comment number 126.

    Lots of spin here and not much content. This government is no different from the last: when it is in trouble it spends other peoples money to buy popularity. This is the same spend, spend, spend approach as the last government. I don't think this, or the £40bn bank guarantee, or the £1bn subsidy to the young unemployed will solve our problems. Spending money we haven't got isn't the answer.

  • rate this

    Comment number 125.

    For any economic booster scheme to work it must put money in the pockets of those most likely to spend. The country is incredibly wealthy but a large part of this wealth is stagnant, tied up in property for example. Meanwhile, those likely to spend are unemployed/have benefits cut/earn minimum wage/work part-time. Throwing money at big business will not solve the underlying problem of inequality.

  • rate this

    Comment number 124.

    Numerous flaws in how the cash is proposed to be used :-
    1 Use of public funds for private enterprise (ie rail services) - should be a strict no no
    2 M25 - forgotten why there are hard shoulders ? - stupid !

    Rebuild industry/farming and fishing with cash and make our country sustainable and competitive again.

    Try not to borrow from ANY foreign countries , we don`t need the debt !

  • rate this

    Comment number 123.

    What's going on? Trying to rate comments positively and being ignored, yet negative ratings jump the score up two points. Is this some sort of proxy for the TUC's beilef that money can be manufactured out of thin air?

  • rate this

    Comment number 122.

    @The Mad Kiltie

    "They are now doing what labour were proposing to do before the last elections, i.e. invest in infrastructure to get the economy going."

    Except that labour promised to do it for 11 years and never delivered. Now what needs to be done is being done. If you open your eyes just a little bit and have a look you can see the improvements already.

  • rate this

    Comment number 121.

    I see Berthold Dwinger now blaming Tory even for bank bailout...
    This vilification of Tories becoming completely ridiculous. Don't you remember who were in power just couple years ago when the bail out took place? It was Labour's Mr Brown "saving the world" who did the bail out, not Tories.

  • rate this

    Comment number 120.

    79. OrcusMaximus

    Our huge deficit was caused by overspending, and basing our economy on a housing bubble.

    Some Tories seem to have a very short memory. Did you forget about the bank bailouts? This is primarily a financial crises caused by a lack of regulation. Do try to keep that in mind.

  • rate this

    Comment number 119.

    #Ady-Peter Bridgemont-emily Radetsk..Edinburgh Trams is the warning from History..the £545M full project price has risen to an uncapped (ie it will rise further) £771M for a shorter single line.

    Amazingly the oversight councillor/Director recently said his background in social work possibly wan't the best competency set for someone with responsibility for a major transport project...

  • rate this

    Comment number 118.

    Most of the big pension funds are already in deficit, so where is the investment money to come from? The slick answer is that the government will provide capital investment guarantees and a high rate of interest to the pension funds to compensate for adding to their deficits.. Who'll pay for this? You and me. It looks like a hidden tax plan.

  • rate this

    Comment number 117.

    At last the Government has found a few brain cells and learning from History eg Germany and UK/USA after the depression. Contracting work producing real jobs please not money for old rope. They produce Nothing. These new jobs will also be British jobs not money to spend on foriegn imports by those sitting on their bums.

  • rate this

    Comment number 116.

    This new money will be loaned to the government. whoever loans it will want the principal back plus interest. The uk is already has 500% debt (gov, personal and commercial). More debt is not the answer to this crisis, you really really cannot drink yourself sober, more debt can not reduce debt.

    We need money reform draft bill already written:

  • rate this

    Comment number 115.

    It seems likely that investment in our infrastructure has a chance of attracting investment as a real return from the real economy will be attractive compared to the low interest rates available from Government bonds. This looks like it might work!

  • rate this

    Comment number 114.

    This is looking like the act of a desperate government.
    But how much of this will benefit ordinary people and how much big business especially foreign firms who will bring in cheap labour from eastern Europe.
    I suspect this has more to do with looking as if Dave is doing something rather than playing the violin while the country goes to hell in a handcart
    This is too little too late to save us.

  • rate this

    Comment number 113.

    89.Peter Tosh
    "why didn't he do this one year ago.."

    Because no one could then foresee the wreck the Eurozone has become. All the projections then were that the world economy would be on its way to recovery by now.

  • rate this

    Comment number 112.

    The British economy cannot compete with the manipulated exchange rates of certain countries.
    Britain needs more manufacturing.
    Unfortunately without some control over imports, and an abandonment of the zero wage inflation target, the economy will just continue to stagnate.
    Small Service Businesses have too few consumers, and manufacturers cannot compete with cheap imports.

  • rate this

    Comment number 111.

    38.zarathustra Re my 32
    'Oft quoted historical fallacy. It was rearmament for WW2 that pulled the US out of depression'
    What was the fallacy? that it didn't work, that it didn't begin with the TVA, or that it wasn't all-American goods and labour? And what have 'liberals' to do with it? Do you mean Keynesians? or true liberal free-traders? though if the latter I don't understand the relevance.

  • rate this

    Comment number 110.

    Oh indeed, lots of new infrastructure projects. That'll be plenty of jobs then for even more of those "reliable hardworking immigrants who have better work ethics than the British", according to so many of our own business-people.


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