Chancellor George Osborne launched the UK Guarantees scheme that sees the government underwrite major infrastructure projects (Reuters)
Around £40bn worth of British infrastructure projects struggling to find finance could be underwritten by the government as part of the the UK Guarantees scheme, in another significant economic push by Chancellor George Osborne as he fights against the recession and for his own political reputation.
This latest scheme comes on top of £9.4bn in rail infrastructure investment by the government, as well as intensifying monetary policy efforts from the Bank of England, in a burst of action to improve the dire state of the UK economy.
"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," Osborne said in a statement announcing the new scheme.
"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."
From autumn major infrastructure projects that cannot find finance can apply to be guaranteed by the government, as it absorbs the potential risk for would-be investors
To qualify for the UK Guarantees scheme, the infrastructure project must meet several key criteria, such as it must be of "national significance" and start within a year after being guaranteed.
The Treasury said projects must also have financial credibility so as to limit the risk to taxpayers. Treasury officials will assess each application under the UK guarantee scheme on a case-by-case basis.
Under UK Guarantees there will also be £6bn made available in temporary loans to infrastructure projects under the Public Private Partnership (PPP) banner that are struggling to find private finance.
Ordinarily funds for PPP projects are raised entirely from the private sector, but a Treausry statement said the government is being forced to step in "as an exceptional response to the current difficult market conditions".
There will also be support for the UK's struggling export market, which has seen volumes and values plunge in recent months.
Overseas buyers of UK exports will have around £5bn of short-term loans guaranteed by the government.
"Sectors supported could be aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, hospital construction and management services, and sports infrastructure," said the Treasury.
Rail infrastructure investment and BoE monetary action
The government has already announced that over £9bn will be spent on improving Britain's creaking Victorian rail network, from electrification of some lines to the upgrade of stations.
Proponents say it will create faster links between key regions and London, which should encourage business investment in areas that desperately need jobs and development, particularly in the north.
The work required to improve the rail infrastructure should also lead to more jobs being created.
As well as rail infrastructure investment to get the economy moving, the Bank of England launched two new credit easing schemes designed to free up lending from banks.
Funding for Lending and the Extended Collateral Term Repo facility sees cheap loans being made available by the Bank of England to banks.
It is hoped that this cheap cash will lead to affordable lending to the wider economy, namely businesses and consumers.
A lack of access to affordable credit is holding back the UK economy, argues the Bank of England and Treasury, because businesses who want to invest in expansion are being stalled.
A further £50bn will be injected into the economy under the Bank of England's quantitative easing programme, which sees it buy up gilts from the market to improve liquidity.
It takes the programme's total to £375bn.
Cash gifted to business balance sheets from the gilt purchases would then be spent on jobs and expansion, it was hoped, though recent research suggests the money is being hoarded instead.
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