George Osborne pumps £50bn into UK – but it's 'not Plan B'
A second 'jobs and growth' package is expected, including an expansion of housebuilding
Andrew Grice has been Political Editor of The Independent since 1998. He was previously Political Editor of The Sunday Times, where he worked for 10 years, and he has been a Westminster-based journalist since 1982. His column, Inside Politics, appears in The Independent each Saturday.
Wednesday 18 July 2012
A £50bn plan designed to jumpstart Britain's flatlining economy will be unveiled by the Government today.
Although ministers deny they are implementing a "Plan B", their boost for major building projects will be seen as an answer to critics who claim that the Coalition's deep spending cuts have sent the UK back into recession.
But George Osborne, the Chancellor, will argue that he is using the Government's "hard-won credibility" to underwrite projects stalled by lack of confidence and banks refusing to provide finance.
The Treasury's "UK Guarantees" scheme, demanded by David Cameron and Nick Clegg earlier this year, is aimed at giving the go-ahead to:
* up to £40bn of "ready or nearly ready" nationally-significant projects in areas such as energy, transport, communications (including broadband) that can start within 12 months
* a temporary lending programme for about 30 stalled public-private partnerships worth £6bn, including for schools, hospitals, housing and transport
* £5bn of long-term support for British exporters in areas such as aerospace, oil and gas, hospital building and telecommunications.
The Treasury insists the package will not add to public borrowing because it would only cost money if loans are not repaid. The risk of that happening is seen as minimal because the schemes will be carefully vetted to ensure value for money.
A second "jobs and growth" package is expected in the autumn, including an expansion of housebuilding – one of the easiest ways to boost the economy quickly.
Mr Osborne will announce his plans with Danny Alexander, the Liberal Democrat Chief Treasury Secretary. The Lib Dems have been pressing strongly for what they have called a "Plan A plus" to step up the drive to secure growth.
Mr Osborne said: "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."
Mr Alexander said the new measures will help work get started on many important infrastructure projects and help major exporters, providing lasting benefits for thousands of people and a significant boost to the economy.
Bids for the £40bn pot will be invited from today by Infrastructure UK, a Treasury body. It will approve the first guarantees in the autumn and the first building work should start early next year.
The programme will be welcomed by British industry, which has been lobbying for more Government intervention for months. But it is likely to be seen as "too little, too late" by the Labour Opposition, which claims the double-dip recession has been "made in Downing Street" and is demanding more dramatic measures to kickstart the economy such as a temporary cut in VAT.
Labour's fears were underlined on Monday when the International Monetary Fund downgraded its forecast for the UK economy from growth of 0.8 per cent to just 0.2 per cent this year. Ministers blamed the worse than expected crisis in the eurozone.
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