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Jon Excell
Editor
Cautious welcome for £50bn infrastructure plan
With the IMF this week downgrading the UK’s 2012 growth prospects from 0.8 per cent to 0.2 per cent, today’s announcement that the government is to underwrite £50bn of investment in infrastructure and exports is being cautiously welcomed by an industry that’s crying-out for a growth strategy.
The key element of the package - the “UK Guarantees” scheme - will see the government underwrite £40bn worth of funding for a host of critical infrastructure projects across the transport, energy, utilities and communications sectors. The aim is to reinvigorate projects that have stalled due to difficulties raising money from private investors. According to a treasury statement, the first recipients could be identified as soon as this autumn.
The other elements of the package are a £6bn temporary loan scheme to shore up around 30 public-private partnership infrastructure projects can go ahead and a £5bn scheme that will support British exports by providing loans to overseas customers.
The announcement has been welcomed by many, including CBI director general John Cridland who said that it should help “fire up” Investment and exports, the “dual drivers of future growth in the UK.”
The Institution of Civil Engineers also praised the intention to get infrastructure projects moving, although its director general, Nick Baveystock, warned the government not to make the criteria for accessing the guarantees excessively difficult.
Meanwhile, more vocal critics of the scheme are concerned that, once more, the taxpayer will end up taking on the private sector’s liabilities. And the claim by the chief secretary to the Treasury, Danny Alexander, that “[this] would only happen if something went wrong” is hardly likely to reassure a public that’s increasingly sceptical of the government’s ability to handle big projects.
What’s more given that qualifying projects must be able to start work within 12 months, and must have a positive impact on economic growth it’s questionable whether the scheme will actually stimulate anything other than projects which would have happened anyway.
Nevertheless, as we’ve long argued on The Engineer, unlocking investment in infrastructure will be key to the UK’s economic growth and the insistence that qualifying projects must begin within the next 12 months will put pressure on the government to deliver on its promises.
In the meantime, the Treasury has steered clear of identifying specific projects. But with energy, transport and utilities looming large in the plans, we’ll wager that the long proposed Severn Barrage, and increased airport capacity for South East England will once again enter the running.
Readers' comments (9)
Carolyn Knight | 18 Jul 2012 2:24 pm
Whoever actually lends the money will still want your first-born son and your entire estate as collateral.
Most of these schemes never seem to actually get the money moving. In the end we'll still be relying on the city to do the right thing -and when has that ever happened?
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JohnK | 18 Jul 2012 4:17 pm
Better to force the banks to do what they are supposed to do. Make their money by lending it, not by gambling with it.
Reasonable cost of readily available money will do more to stimulate UK Ltd than this kind of so-called 'infrastructure plan'.
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Anonymous | 18 Jul 2012 4:46 pm
The problem, as always with big, or any, infrastructure projects set out by the government at the time is that it takes so long to get things actually started that the next government usually shelves it for whatever reason, so it either doesn't happen or it has to go through the whole approval process again and then the lobbyists get on the band wagon with the NIMBYs and it all goes horribly wrong and never happens and the country ends up woefully behind the rest of Europe, etc, etc.
Same old, same old!
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Anonymous | 18 Jul 2012 7:42 pm
Suppress the "road adoption" system. Any road must be build with the correct standard learned from mistakes and research. And that will save a lot of money from infrastructure not build up to good standard first time.
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John Jessop | 18 Jul 2012 8:07 pm
Same old action but misdirectd - more public sector borrowing taking years to see any benfit. What we need is increased consumer spending so as to increase the demand for product and services. We need significant tax reduction on salaries below £25k and banks should reduce interest rates on mortgages.This will put money in pockets and probably lift confidence which will encourage people to spend.
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J.C. | 19 Jul 2012 5:40 pm
JohnK "
Better to force the banks to do what they are supposed to do. Make their money by lending it, not by gambling with it."
You are so right. In order to do this we would have to increase taxes on short term capital gains to astronomical levels. It would never pass, the banks own the politicians.
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Anonymous | 20 Jul 2012 1:16 pm
Don't give another penny to the banks or the management consultants - give every citizen earning less than £40,000/year £1000 each to spend and kick start the economy, on one condition - it MUST be spent on British goods.
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JohnK | 21 Jul 2012 10:33 am
J.C. - Not sure massive increase in CG taxes would be enough, notwithstanding political aspects.
To stimulate the economy a guarantee of low cost loans to small/medium sized businesses and support for exporters to bring money in from abroad in needed to decrease balance of payments deficit.
Conversly, An initiative to give each citizen £1k to spend on, presumably consumer goods, may actually increase balance of payment deficit as not many British companies make consumer products any more and such monies would probably go abroad.
I suppose we could form consortia and combine our £1k's to buy F1 cars or jet engines.....
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julian watson | 25 Jul 2012 4:52 pm
I only want a loan for 1 year of £200k this will enable 12 low cost and affordable homes to be built in my villiage. I have planning (took 7 years) and I own the land, unfortunatly I have not been able to find a bank or a backer as yet. Can I access the fund / guarentee? as my MP suggested last week or is my scheme not big enough/ Finally I have looked at many articles about this fund BUT NONE OF THEM SAY WHERE TO FIND IT!!!
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