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 149.

    Cut a project. Do it anyway. Add the cost of the cut to the project. Then lie to the Electorate. The cuts cost more than the cuts save. Bring funding from pension funds. So the next round of cuts is a cut of Pension fund investments. A strategy sustainable the public realise every single programme of the last five years is still being run - more expensively and less accountably.

  • rate this

    Comment number 148.

    "ts all about confidence and how can this returned with the negative media, yes that includes the BBC talking every thing down."

    Shoot the messenger - avoids having to THINK at all doesn't it? Certainly avoids considering that this country has been living a lie for 30 years since Big Bang, and that the main beneficiaries of this shambles will be the rich - who set the whole credit boom in motion

  • rate this

    Comment number 147.

    It's transport systems WITHIN cities that need to be tackled. Other countries have smart, fast, efficient subways, bus lanes, boat links and tram systems. We have congestion and commuter misery.

  • rate this

    Comment number 146.

    "Why is he raiding pension funds to do this?"

    Sleep easy, your pension fund is not being 'raided' or forced to do anything against its will. Canadian (& other) pension funds for instance have been buying into UK infrastructure assets for ages, for the steady income & high yield. Its a better deal than high priced low yielding UK gilts at the moment.

  • rate this

    Comment number 145.

    From the list of infrastructure projects, it looks like it's a multi-billion Pound boost for the English economy.
    I thought this was the United Kingdom government...

  • rate this

    Comment number 144.

    blimey no user names left
    Just now

    "Whistling Neil and MrHW - he's not raiding pension funds at all...this is giving them the option."

    I wonder when the option will become an offer that cant be refused?

  • rate this

    Comment number 143.

    The only investment that matters is investment in people: education and training. Britain has a shortage of skills and this government is making it worse. Spending money on big projects isn't the answer. Contracts will go to foreign companies, money will be spent on foreign goods, jobs will go to foreign workers because our people don't have the skills and training. About time we understood this.

  • rate this

    Comment number 142.

    And all of this from a government that said you cant borrow your way out of a recession?

  • rate this

    Comment number 141.

    Why don't we stop pretending?
    We've lived off unearned borrowed money for years to finance services and lifestyle we have not earned. We ran a massive deficit even in the 'good years' e.g 2006 and stuck our heads in the sand (eg we now need to pay for 100s of new schools for the kids of immigrants). Now its payback time. Thank goodness its not at the level of Greece, ireland, Italy etc.

  • rate this

    Comment number 140.

    123. sxgree
    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
    Tough to understand but imagine you are the only one supporting a particular viewpoint and dozens are simultaneously voting against it...

  • rate this

    Comment number 139.

    Whistling Neil and MrHW - he's not raiding pension funds at all - as I read it, this is giving them the option, and presumably some tax incentive, to invest of their own volition, in the expectation of making a return on behalf of their pensionholders. It is not a tax grab. The question is, whether they would sign up to such a large extent as hoped for.

  • rate this

    Comment number 138.

    Electrification of the Manchester to Leeds line is long overdue. Let’s just hope the electric trains needed to run on the track will also be built in the UK?
    The new deal starts here?
    It’s a funny old game Saint.

  • rate this

    Comment number 137.

    So Osborne & ConDems have actually woken up, & also taken my advise.
    I have said many times, that growth strategy should have been built into austerity cuts, from the begining.

    You cannot just slash & burn public parts of economy without dangerous consequences.
    £5 to £10 billion should have been built into original austerity cuts to be directed at NEW jobs/wealth creation strategy

  • rate this

    Comment number 136.

    Is it too much to ask that we get a guarantee that none of these projects will go to foreign companies?

  • rate this

    Comment number 135.

    To be fair, there would be a temporary rise in the purchases of beer and sandwiches, and B&B rooms by said Eastern european workers.
    And then everyone one would be back to square one, except with nice new roads (they can't afford to drive on), nice new privatised hospitals (oops not quite there yet) and so on.
    Not a long term solution.

  • rate this

    Comment number 134.

    So the toll on the Humber Bridge is going to halve - but rail fares are increasing by a quarter! That will really encourage people to move towards sustainable transport!

    What with all this road building too, what happened to the "green" government??

  • rate this

    Comment number 133.

    People need to realise that money is debt. If you look at a £5 note it says that you "promise to pay the bearer a sum of £5". It is an IOU. Debt is not a bad thing, debt enables people, organisations and countries the ability to buy and develop things when financial resource is not immediately available. It is the inabilty to service (i.e. pay back) these debts that is a bad thing.

  • rate this

    Comment number 132.

    Why is he raiding pension funds to do this? A financial transaction tax at just 0.05% would raise over £30billion per year. How dare he use even more public money to support private businesses? It would be interestng to know how much construction cpmpanies donate to the Tory party.

  • rate this

    Comment number 131.


    Putting money into the pockets of thsoe most likely to spend especially if taken from the pockets of those who have saved will help no one except the waster. Stagnant money?? That money belongs to people.

    If the TUC wants to "reverse the public sectror pay freeze " then they can do it with their own money not expect to stick their mitts even further into my pocket

  • rate this

    Comment number 130.

    Got to admire the sheer cheek of this one, first you cut all the programmes to save money then 18 months later you find a way to actually do these project having realised the effect of cutting infrastructure projects has been to damage the economy and think to raid pension funds to do it. Sort of read precisely what Brown did with his raid on pension funds.


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