Government to unveil new infrastructure investment and exports plan
- Published on Wednesday, 18 July 2012 10:51
- Posted by Vicki Mitchem
The Chancellor of the Exchequer and Chief Secretary to the Treasury have today unveiled a new UK Guarantees scheme to dramatically accelerate major infrastructure investment and provide major support to UK exporters.
This support is only possible because of the Government's hard-won fiscal credibility, which the Government is now passing on to support the UK economy.
Applications open today for UK Guarantees to kick start critical infrastructure projects that may have stalled because of adverse credit conditions. Up to £40 billion worth of projects that are ready or nearly ready could qualify and, subject to legislation, the first guarantees are expected to be awarded in the Autumn. To qualify, these projects must be ready to start in the 12 months following a guarantee being given.
Also from today, a new temporary lending programme as part of UK Guarantees will be available to ensure that around 30 public private partnership infrastructure projects worth an estimated £6 billion in the next 12 months can go ahead.
A major £5 billion export refinancing facility will be available later this year as part of UK Guarantees to support British exporters by ensuring that overseas buyers have the long-term funding they need.
The Chancellor of the Exchequer, the Rt Hon George Osborne said:
"The credibility the Government has earned through tackling the deficit is already helping millions of British families and businesses through keeping down the cost of borrowing.
"Now 'UK Guarantees' will use that hard-won fiscal credibility to provide public guarantees of up to £50bn of private investment in infrastructure and exports.
"Britain's credibility has been hard-won and involved difficult decisions, so I want to make sure its benefits are passed on to the whole economy."
The Chief Secretary to the Treasury, the Rt Hon Danny Alexander said:
"The measures we're announcing today will help work get started on many important infrastructure projects and help our major exporters, providing lasting benefits for thousands of people and a significant boost to the economy.
"This is yet another example of the Coalition working together to put its hard-earned economic credibility to work to increase growth. "
Under UK Guarantees, the Government will aim to ensure that where major infrastructure projects are struggling to access private finance because of adverse credit conditions, these projects can go ahead.
Applications can be made from today to Infrastructure UK, the HM Treasury body focused on prioritising and enabling investment in UK infrastructure.
Around £40 billion of projects could qualify for the provision of guarantees. These projects could come from a range of sectors including transport, utilities, energy and communications. Eligible projects will be subject to charges, due diligence and as a minimum must meet five key criteria:
- Nationally significant, as identified in the Government's National Infrastructure Plan 2011. The Government will also consider other exceptional projects of national or economic significance on a case-by-case basis, such as university infrastructure;
- Ready to start construction within 12 months from a guarantee being given and having obtained (or about to obtain) necessary planning and other required consents;
- Financially credible, with equity finance committed and project sponsors willing to accept appropriate restructuring of the project to limit any risk to the taxpayer;
- Dependent on a guarantee to proceed and not otherwise financeable within a reasonable timeframe;
- and Good value to the taxpayer, assessed by HM Treasury to have acceptable credit quality, not present unacceptable fiscal or economic risks and to make a positive impact on economic growth.
The Government will consider the most effective form of guarantee on a case-by-case basis using a robust assessment and approvals process.
As part of UK Guarantees, a new temporary lending programme will be launched today to help major Public Private Partnership (PPP) infrastructure projects that are struggling to secure the required amount of private lending to go ahead. An estimated £6 billion worth of projects due to proceed in the next 12 months could be eligible, including projects in the transport, health, housing and education sectors.
PPP projects currently raise all of the required project debt from the private sector. The Government is making loans available to projects for the first time as an exceptional response to the current difficult market conditions. This will ensure that these projects are not delayed by current constraints in the long term lending markets. The loans will be made on commercial terms, alongside the existing commercial lenders and for a minority of the project debt requirement.
Applications can be made to Infrastructure UK by project authorities or sponsoring Departments. Loans advanced under this programme will be funded from existing departmental capital budgets, subject to HM Treasury approvals.
This will be a temporary intervention, initially available for a period of 12 months from today.
As part of UK Guarantees, a £5 billion exports refinancing facility will provide long-term loans for overseas buyers of UK exports at competitive rates by guaranteeing a series of short-term bank loans.
UK Export Finance will begin supporting loans by the end of the year. Up to £5 billion of loans outstanding will be supported, with the programme designed to ensure that there are minimal risks to the public finances.
Sectors supported could be aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, hospital construction and management services, and sports infrastructure.
Source: ©HM Treasury