George Osborne's latest plan: ask Britain's savers for money

Treasury to fund infrastructure projects by selling us 'growth bonds'

George Osborne is drawing up plans to use Britain's army of small savers to boost the country's growth prospects.

Click HERE to view graphic

The Chancellor has told Treasury officials to find ways to persuade savers to transfer billions of pounds held in bank accounts, building societies and investment funds to new government "growth bonds".

The money would be invested in infrastructure projects such as toll roads, green energy and housebuilding.

Savers could be offered tax breaks, similar to those available in Individual Savings Accounts (ISAs).

Ministers are also looking at how they can use the strength of the Government to underwrite the risk to small investors. They are considering proposals, similar to those recently announced for housebuilders, for the Government to underwrite a given percentage of any potential losses by the projects. This would mean that the Government took the "first" risk with the schemes – losing its money before any investors.

Such a guarantee would reassure the public, while ministers claim that the overall risk liability to the Government would be minimal. Calling on private savings to be used in the national interest would be the first time such a potentially lucrative source of cash has been tapped since the Second World War. Then, savings certificates were issued to help finance the war effort under a scheme which eventually became National Savings and Investments. NS&I, wholly owned by the Government, manages about £98bn in savings, has 9 per cent of the entire UK savings market and accounts for 16 per cent of the national debt. It is understood that one option being investigated by the Treasury is using NS&I as the vehicle for the new bonds.

Projects that could benefit from the idea include extending London Underground's Northern line to Battersea, a new Thames crossing, toll roads alongside some of the busiest sections of motorway, and significant investment in housing stock. Ministers point out that contraction in the building trade led to the double-dip recession.

A senior government source told The Independent: "While a lot of families are struggling and have no disposable income, there are others who are quite cash rich but have nowhere secure to put their money where they can be guaranteed a decent return. Because interest rates are as low as they are, there is the potential to tap into this money and get it invested in infrastructure which will have a dramatic effect on Britain's long-term growth."

The benefits of investing in infrastructure were twofold, the source said. "Not only will it provide a welcome kick-start to the economy at a time when growth is sluggish, but infrastructure improvement will also help Britain's long-term competitiveness and encourage investment from overseas. In that way it is a win-win situation."

Another source emphasised that the scheme was not seen as an alternative to investment from pension funds and overseas sovereign wealth funds but, rather, an addition. "To be fair, the money we can realistically raise from British savers will be far less than the potential from overseas investors or pension funds," the source said. "But it sends a clear signal and allows the public to invest in Britain's future."

Both David Cameron and Nick Clegg have pledged to make huge investments in infrastructure. Mr Clegg has said the Coalition is looking at "massively amplifying the principle of what we did on credit easing" – a reference to the £20bn scheme to use government balances to support lending to small firms.

He said some people were "neurotic" about using state funds to assume additional risks on housing, transport and other projects, and hinted that Treasury officials were hesitant. But he added: "From the top of government, a few weeks ago we decided this was the route we're going to take. That's the instruction we've issued to the Treasury."

Mr Clegg recently held talks in South Korea about securing investment from its pension funds. Meetings are also believed to have been held with Qatar and other Gulf states to drum up backing from their sovereign wealth funds. However, talks between the Treasury and UK pension funds about channelling billions of pounds of private savings into new projects have yet to bear fruit. The National Association of Pension Funds hopes to launch a pooled £2bn infrastructure fund but does not expect it to be up and running until next year. Mr Cameron and Mr Clegg hope to unveil the schemes before Parliament's summer recess. But Treasury sources said the detail was proving more complicated than expected and a final announcement might be made in the autumn. "The worst thing would be for it to unravel after we've announced it," said one.

Suggested Topics
News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Pharmaceutical Computer System Validation Specialist

£300 - £350 Per Day: Clearwater People Solutions Ltd: Pharmaceutical Computer ...

High Level Teaching Assistant (HTLA)

£70 - £90 per day: Randstad Education Birmingham: Higher Level Teaching Assist...

Teaching Assistant

£50 - £80 per day: Randstad Education Birmingham: Randstad Education is the UK...

Senior Java Developer - API's / Webservices - XML, XSLT

£400 - £450 Per Day: Clearwater People Solutions Ltd: Our client is currently ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits