Chancellor to use bonds to boost jobs

The Chancellor, George Osborne, is considering introducing "project-specific bonds" and reversing a widely criticised Labour tax policy in the Budget later this month.

The coalition is looking to stimulate the flagging economy by boosting the country's infrastructure, and Mr Osborne has been canvassing industry leaders for ideas that would not increase government spending. At a meeting two weeks ago with bosses of leading infrastructure companies, the CBI and the Treasury body Infrastructure UK, he was deluged with proposals.

It is understood that at least two of these ideas are likely to be introduced in either the Budget or the accompanying revised National Infrastructure Plan, which is updated from last year. Then, Infrastructure UK, which will have authored both versions of the report, said that the country needed £200bn of private investment in areas such as energy and transport infrastructure.

Sources said that the industry was pressing for bonds that would be issued to fund specific projects. An attendee of the meeting said: "The Chancellor wants us to help him with what can be done from the Dispatch Box without prejudicing our AAA credit rating. I and others advocated to the Chancellor project-specific bonds."

The idea would see the Government either issue or underwrite the bonds for the private sector. Geoffrey Spence, Infrastructure UK's boss, is believed to be a fan, though critics say that the Government's backing would mean that they end up on the state's balance sheet.

One strong opponent said: "However the Government looks at it, project-based bonds end up on the Government's books. They're so desperate to create jobs that the Government will look at anything."

The previous government withdrew industrial buildings allowances from this year under the 2008 Finance Act. The allowances encouraged investment in industrial and manufacturing properties. The CBI infrastructure board, set up in September under the chairmanship of the GE UK & Ireland chief executive, Mark Elborne, is known to be keen to see the relief reinstated.

A source close to the Treasury said: "The [CBI infrastructure] board has made the point on industrial building allowances. Supporting the allowances is not going to affect Treasury tax takings this year, and, by the time it did, the investment it encouraged would increase revenue [elsewhere] – the Chancellor wants revenue-neutral ideas."