George Osborne and Danny Alexander: Govt credibility can boost infrastructure

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WRITING FOR POLITICSHOME, GEORGE OSBORNE AND DANNY ALEXANDER ANNOUNCE A £50BN INFRASTRUCTURE BOOST FOR THE ECONOMY, AND REITERATE THEIR COMMITMENT TO THE COALITION.


The reason the Conservatives and Liberal Democrats came together in a Coalition Government remains as strong as ever: to put our economy back on track. Two of the three main political parties joined together to sort out the economic mess left behind by the other.

Right from the start, we have not ducked the difficult choices – we’ve tackled them head on. Despite headwinds from the eurozone crisis which have made the job harder, we have reduced Britain’s huge budget deficit by more than a quarter in just two years. We’ve been as ambitious in restoring Britain’s competitiveness – overhauling the planning system, reducing income taxes for working people and cutting corporate taxes to the lowest level in the G7. And we’re tackling long-standing issues which other Governments have ducked – fixing the broken banking system that brought this country to its knees, reforming our schools system, capping benefit bills and making public sector pensions sustainable. None of these choices have been easy or popular, but in the face of fierce opposition from vested interests, we have seen them through – because they are vital for Britain’s long-term future.


Two years on, as the eurozone crisis and the recovery from the banking crisis continue to drag on growth, it is even more important that the coalition partners work together in the national interest. The credibility the Government has earned by tackling the deficit is already benefitting millions of British taxpayers, families and businesses through consistently low interest rates. And that creditworthiness enables us to do much more to support our economy than some other countries at present. We have already used our balance sheet to support small businesses through our National Loan Guarantee Scheme – banks have offered over 13,000 more affordable loans through the NLGSto small businesses since March. Last week, with the Bank of England, we launched coordinated action to inject new confidence into our financial system. The Funding for Lending scheme will make loans and mortgages cheaper and more easily available, providing welcome support to families and businesses.

Credit is not the only area where we can use the confidence in our creditworthiness to support growth. High-quality infrastructure is vital to Britain’s long-term competitiveness, but the staggering fact is that while public spending soared to unsustainable levels over the last decade, UK investment as a proportion of GDP actually dropped. After years of short-term spending instead of sensible long-term investment, Britain – the country that brought the world the first railway, nuclear power stations and jet engines – has fallen behind its competitors.

Last year, the Government published a National Infrastructure plan which, for the first time, identified the pipeline of over 500 infrastructure projects we want to see over the next decade to overhaul its creaking infrastructure. And we are mobilizing the finance needed to deliver them too. We’re going ahead with Crossrail and High Speed 2 – projects that will transform transport across London and across Britain. In the autumn, we cut current spending in order to fund £6.3 billion of additional spending on infrastructure, and this week we committed to the biggest overhaul of our rail system since the Victorian times. Despite tough decisions on spending we are investing more in our transport system now than at the peak of the spending boom. Alongside public investment, we are targeting £20 billion of private sector investment. We have already secured major investment in Thames Water and Northumbrian Water from places like China and the Gulf, and our new Pension Infrastructure Platform will commit its first £2bn investment in UK infrastructure early next year.

But partly because the banking system is still recovering from the crisis, some projects which are vital to our economic future are struggling to get off the ground because of financing problems. So today, the Treasury is setting out how it plans to use its balance sheet to accelerate infrastructure investment dramatically.

First, the Government will make available innovative new guarantees for major infrastructure projects that have stalled because of lack of available finance. We will put the hard-won credibility of the nation’s balance sheet to work for the benefit of the whole economy. The two-year scheme begins today, with the first guarantees expected to be awarded in the autumn. To be eligible, projects will be of national significance – as identified by the Government’s National Infrastructure Plan 2011; financially credible; good value for the taxpayer but without a guarantee would be unable to proceed. And they must be ready to begin construction within a year. This scheme has the potential to transform UK infrastructure – up to £40 billion of energy, transport, communication and utilities projects could benefit.

Second, a new temporary lending programme will provide support to public private partnerships that are struggling to get financing. This will ensure that over £6 billion of transport, hospitals, schools and housing projects are not delayed by current constraints in the long term lending markets.

Third, we will provide targeted support to our export sector – vital if we are to move away from an economy built on debt and start to pay our way in the world. We need to export more to the likes of China and India. A new £5 billion pound Export Guarantee Facility will provide long-term loans to overseas buyers of UK exports at competitive rates. Major growth sectors from aerospace, oil and gas extraction equipment, to transport and telecommunications - could benefit. Many thousands of manufacturing jobs will be supported.

As separate Conservative and Liberal Democrat parties we understandably have our differences. But as coalition partners in these difficult economic times – as difficult perhaps as any our country or our continent has faced outside of war – we are totally committed to working together to 2015 to deal with Britain’s problems and put our economy back on track.

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Response: David Workman, director general, Confederation of Paper Industries (CPI)

The announcements made this week to help finance infrastructure projects are to be welcomed. However, of most concern to Energy Intensive Industries (EIIs) such as Paper is the mounting cumulative cost of the government’s energy and carbon reduction policies. This was starkly evidenced in a report from BIS published last week. The Chancellor, in his Autumn Statement, announced a support package for the EIIs worth £250m over two years. This is but a drop in the ocean of what is going to be required. If manufacturing is to drive economic growth what we really need is a Manufacturing Strategy with an energy policy at its heart aimed at delivering continuity of supply at internationally competitive prices.

Response: Ian Brinkley, director at The Work Foundation

The Coalition's plans are very welcome - exactly what we need to see the government focused on. What is more in doubt is how much is new rather than recycled, what they will actually deliver in practice, and when. The private sector needs more certainty now if it is going to invest on a big scale. That means more upfront direct action, using Britain's credit-worthiness to increase public investment in the physical and digital infrastructure, and in supporting public and private investment in science, design and the new technologies of the future. Now that would be a growth package really worth talking about.