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 169.

    "Self Financing Public Sector Pensions" - ballderdash!
    The fundamental flaw of pensions in the welfare state after WW2 was that they are not put into a pot for everyone. When you retired at 65 you may only have lived a couple more years. Now you could have 20+ years in retirement and a smaller working population (as % of the total population) to pay for it.
    This is the lie ALL politicians peddle.

  • rate this

    Comment number 168.

    94The Green Hornet
    Why are the TUC and Labour so obsessed with borrowing more money?

    And where is this money coming from, borrowing some of it from the Chinese according to the story.

    Is it still madness when it's the Tories borrowing or does it turn to pure insanity!

  • rate this

    Comment number 167.

    Mediocre men bereft of ideas.

  • rate this

    Comment number 166.

    It would be appropriate to complete the A303, like the Kingkerswell link, it should have been done 30 years ago!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • rate this

    Comment number 165.

    It would be preferable for all public works to be of improvement to Great Britain.

    How proud would we all be if the unemployed grafted on public works and we had road, rail and infrastructure fit for the 21st Century.

    Then think back to the Guardian pages under Labour and remember that instead of this, the jobs advertised were, 'Diversity Awareness Managers' on £85,000. Oh dear, oh dear.

  • rate this

    Comment number 164.

    I am in favour of funding for infrastructure projects as this means better communications and more business in lots of ways. I would have liked to see a scheme to dual the whole of the A303 which would make the South West more accessible from London. Also more motorway services should be provided everywhere.

  • rate this

    Comment number 163.

    I will only speak positively...

    Great news - and i appreciate the emphasis on the north rather than learning about Crossrail, Heathrow, M25 et el getting the booty as usual. The T&W Metro only covers half of Newcastle. Could this be the long-awaited other half?
    Also Manchester/Leeds makes up for more than 10% of the economy so another essential project gets the green light

  • rate this

    Comment number 162.

    "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.."

    The New Deal was failing by 1937. Read the article.

  • rate this

    Comment number 161.

    I can't believe that the government are investing so much in road projects when in every forum you read about "tightening belts" people are syaing that they are reducing road use to cut personal costs. How about kick starting small businesses and the housing market instead?

  • rate this

    Comment number 160.

    Wow, things must be bad for the Conservatives to turn to Keynes to get out of the mess we are in. Didn't Cameron lambast him before and during the election? Then he reigns in public spending in a tottering economy and is forced after only a year to resort to the unthinkable for a right wing blue blood. Well Done! Moron.

  • rate this

    Comment number 159.

    to 155.AlexWassall

    If you can't write or spell in English, how can you argue?

  • rate this

    Comment number 158.

    It is good that this money is not just being squandered on ballooning the public sector. But we really need to know that none of the money is going into the pockets of wealthy foreign based tax dodgers.

  • rate this

    Comment number 157.

    The money coming from big British pension funds and Chinese investment...why does that fill me with foreboding? Not to mention further cuts!

  • rate this

    Comment number 156.

    Surprised to not see electrification of the Midland Mainline, which Network Rail says has a positive business case better than any other similar project, isn't included. Also, electrifying Leeds to Manchester won't affect Newcastle to Manchester times as Leeds to near York would still be diesel! Usual Treasury accuracy!

  • rate this

    Comment number 155.

    CriticLunge "rather[...] common benefit scrounging criminal types, "

    I don't support Labour, and I also try to avoid the ad hominim nonsense like you seem to employ.

    Did you know that according to the governments own figures (look them up if you don't believe me) they loose more money per year to inefficiency in the system than to benefit cheats?

    If u don't have all the facts how can you argue?

  • rate this

    Comment number 154.

    About time! However this will not work if the government continues to buy foreign materials, foreign workers and foreign vehicles for the work.
    The BEST investment for the UK would be to use British companies to use British workers and British materials to recreate a freight infrastructure for the railways. Create British jobs, cut congestion, cut transport costs.

  • rate this

    Comment number 153.

    All that money to be spent on projects to increase carbon emissions and to perpetuate global warming. Improving congestion is code for 'increase capacity for more cars'. Then a few years down the line, once more poorly planned housing and business developments have been voted through by local councils, congestion and CO2 emissions will be up again. These old ideas will ruin the nation.

  • rate this

    Comment number 152.

    stevedk and Toxid Tel- I wonder if either of you was trying to earn a living in the 1970's- I was and we had 25% inflation. Thats when our industry went bust, not the 80's. Industrial management was aweful and the unions were even worse- it was thought the latter had made this country ungovernable until Margaret came along. Believe me, our problems now are small beer by comparison.

  • rate this

    Comment number 151.

    how is this supposed to get unemployed into work? l dont see many engineers and builders amongst the significantly unemployed youth of today.

  • rate this

    Comment number 150.

    At last the ConDems have unveiled Plan B, but you wont hear that from our failed Chancellor, who will try and convince us that this was the plan all along. I suppose the Tories tame lapdogs Glegg, Cable & Alexander will follow their new part line.


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