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 209.

    So they're preposing subsidised tolls on the humber crossing, but no mention of something similar for the Severn crossing, which has comparable if not greater number of crossings per week but will costs twice as much as the humber toll come January with another increase in tolls. Any one know of a good reason why they are choosing the Humber crossing not the Severn crossing?

  • rate this

    Comment number 208.

    I would have prefered it had the investment been into technology. Small businesses are ok- ish but tend to move wealth around rather than create it.
    This govt, like all UK govts, does not understand the massive rewards from skills and tech, nor that big business makes big money, nor that to make big money you have to spend big money, though this is a start.

  • rate this

    Comment number 207.

    We will need a large increase from an independent source of electrical energy, able to be regulated by the minute to ensure our variable demand is match by an equally variable and reliable supply. And that aint windpower. The decision for new nuclear was made 8 years ago, the HSE has the safety case & the French are ready to build. Lets see a little political courage and get them built asap.

  • rate this

    Comment number 206.

    If your company is small/medium and British, employs British workers, based in Britain then forget it, you won't win the contract.
    To get to hear of the projects costs a minimum of 200 quid, no small or new business (turnover under a million, less than 5 years old) will get the work, and if you can't invite people to offices in an exotic location you'll not win..

  • rate this

    Comment number 205.

    A worthwhile project i think would be for the Bank of England to start up a chain of High street banks owned by the public and the government warn the other banks that there will be NO more bailouts in the future. I personally would move my account to the "Royal Bank of England" in a heartbeat. The bank would not be able to invest in dodgy derivatives but would make their money on mortgages.

  • rate this

    Comment number 204.

    177 UKstinks. I guess you name tells us all we need to know about you. Firstly Eaton is a school, Oxford a university. Secondly raising the pension age has to do with the unsustainable cost of pensions, not employment, thirdly if we don't help private business to invest we will not get anyone 'off the streets'. Finally, If you hate this country that much go and live somewhere else.

  • rate this

    Comment number 203.

    139 : Pension funds are already invested - they are not huge piles of cash sitting in a vault. The mechanism simply turns the risk attached to any investment in sovereign infrastructure from a sovereign risk into a pension fund risk. So it very much is a risk that will be transferred from HMG to the pension fund unless guaranteed, in which case all that has changed is the number of fees increase.

  • rate this

    Comment number 202.

    The UK government should not spend a single 1p outside of Britain! That would solve ALL our problems at a stroke."

    Really? And if all other governments did that and our companies could not sell products and services to other countries, how would that help British industry, exactly?

  • rate this

    Comment number 201.

    Nice to see the ConDems adopting Keynesian economics. Now they just have to get rid of Lansley's health "reforms".

  • Comment number 200.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 199.

    I'm actually really worried about private pensions. I know the private sector are lambasting public pensions (thanks for the support!) but this story has a whiff of "pension holidays" and other such underhand tactics. The Gov't want to open up private pensions and "allow" them to invest in these projects. Robbing Peter to pay Danny?

  • rate this

    Comment number 198.

    Let's not forget that this last throw of the dice by Osborne is being paid for with the jobs of public sector workers who have been made redundant, and essential public services for the most vulnerable in society that have been scrapped.

    All this will achieve is more public money being shovelled into the pockets of private businesses and shipped to offshore tax havens. It's what Tories do.

  • rate this

    Comment number 197.

    Ichabod - RIGHT We can't just blame banks - we all spent money we didn't have. Our youth competes with British & immigrant workers, people are afraid & need hope. Tories sold off UK companies for short-term profit, Labour spent our pensions. There is no simple answer, but foreign investment frightens me. Swiss, USA, buy our companies, therefore profits/jobs go abroad - remember Rowntree, Caburys

  • rate this

    Comment number 196.

    1) Our nuclear power stations are now 25-30 years old.
    2) Our fixed telephone network is now 20-25 years old.
    3) Fibre-optic penetration is patchy at best.
    4) We still have 25 year old trains that deposit human excrement onto the railway line.
    Still a lot UK infrastructure to go at !

  • rate this

    Comment number 195.

    "Make British based business use British call centres", you could add make the British government and British councils buy British products and services - that would do far more. Give aid by all means, but as British goods and services. The UK government should not spend a single 1p outside of Britain! That would solve ALL our problems at a stroke.

  • rate this

    Comment number 194.

    Another practical move by the Government. A small business will now benefit from the demands required by renovating the infrastructure. They will also be helped with loans and paying the wages of taking on young unemployed people. The links with China over this project are also very positive and will see much more growth as a result of breaking ties with American failing econmic policy.

  • rate this

    Comment number 193.

    While on one side I'm happy that the government can do something without giving money to banks (a big first), I wonder how all this creates sustainable growth.

    If, as it seems, we are in for a long period of depression, aren't these kinds of fix-some-road infractructure projects only good to employ people for a couple of years at most?

    How about fixing the infrastructure of our economy?

  • rate this

    Comment number 192.

    RE Stuart - 133

    Nice to see someone else can understand the T&C's of a IOU.

    Just such a shame to see the powers that be still stuggle to 'balance the books'

  • rate this

    Comment number 191.

    I personally think it would be far better to put a cap on politicians election promises and restrict them from borrowing monies on vote winning projects. If we don't have the money then why should we not save up instead of borrowing it? Oh wait that would mean they would have to work together and actually do something good for the country instead of themselves. That would be a first.

  • rate this

    Comment number 190.

    A multi billion pound push with all the contracts going to the usual suspects? I hope not but not holding my breath. Can't wait to see the tender documents and try to spot where the name of the company that already has the contract has been tippexed out. That is assuming my company can get through all the hoops necessary to even see the tender documents. Note to self, must order brown envelopes


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