George Osborne will announce on Wednesday new a package of measures to get Britain building major infrastructure projects which he claims could lead to £50bn of spending in the economy.
New loan guarantees and lending for big building projects follow months of criticism from across the political spectrum and from the private sector that the government has not been doing enough to generate jobs and growth.
It follows two other significant announcements in the past few days: afunding-for-lending scheme to get banks to make more loans; and support for £9bn of investment in railway infrastructure.
In addition, work is continuing on more investment in housing and road building, prompting one business representative to suggest there had been “a change in gear” from the coalition.
Treasury officials said on Tuesday night that there had been no move to adopt a Plan B for the economy as urged by some critics. They said there would be no rise in public spending, and no impact on public borrowing, because the loan guarantees would not be expected to be called on.
However a government source admitted this week’s series of announcements had been tightly scheduled to create a “big splash”.
The chancellor will announce three separate schemes, the biggest of which will be UK Guarantees, under which the government will secure debts taken on to build “nationally significant” schemes which are not being built because developers cannot raise money at an affordable interest rate, if at all. In a sign of the urgency ministers feel about the need for more spending in the economy, applications will open on Wednesday. Borrowers must pledge to start building within a year.
This measure alone could generate investment of £40bn in sectors such as energy and transport, Osborne will say. The Treasury is not likely to name any single project, but schemes which could qualify include theThames Tideway (a massive sewage tunnel 15 miles long and the width of three London buses).
The government is also planning a temporary lending programme, where developers can borrow money directly from government departments to enable partly-funded projects such as housing, hospitals or new schools to go ahead, and loan guarantees for British exporters.
The government claims its ability to borrow at interest rates under 2%, much lower than commercial lending, or many other national governments, will allow it to launch the schemes.
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 announcements are likely to be welcomed but critics will continue to press for even more government support to “unlock” what the Confederation of British Industry, the biggest employers group, estimates could be £250bn of private and public investment – five times the size of what is announced on Wednesday.
“Investment and exports will be the dual drivers of future growth in the UK and this scheme should help fire up both engines,” said John Cridland, the CBI director general.
“While the government’s proposals address infrastructure financing, we now need to focus on project models to ensure delivery of the world-class infrastructure this country needs.”
Some of the recent government initiatives were flagged up by the chancellor in last month’s Mansion House speech to the City, when he promised a £100bn support programme for the British economy.
But critics have been concerned that until recently none of the promises have been accompanied by the detailed policymaking needed for them to happen.