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Today's entry reports on yesterday's announcement
setting up 'UK Guarantees'.
Yesterday, the Chancellor of the Exchequer George Osborne MP
announced the launch of a new initiative to guarantee shortfalls in
infrastructure funding in certain cases. The announcement can
be found here,
and echoes the CBI's call for something similar at the end of
May (in its document with a carrot on the front) reported
here.
There are actually three initiatives. The first one
applies to 'nationally significant infrastructure
projects', but rather than the meaning of that phrase in the
Planning Act 2008, here it means projects identified in the National Infrastructure
Plan produced last November (which is a larger group, and a
little vague in some cases); it can also apply exceptionally
to other projects.
The projects must be spade-ready within 12 months of getting
their guarantee, which rules out any Planning Act projects for
which applications have yet to be made. The projects have to
be financially credible, good value to the taxpayer, and need this
guarantee to go ahead. Stephanie Flanders, BBC economics editor and
daughter of Flanders and Swann's Michael, put it this
way: "it has to be a perfect project in every
possible respect, but somehow not quite perfect enough to get up
and running entirely on its own".
The guarantee is rather like getting a mortgage where you would
normally be limited to four times your salary, but the government
is saying 'you can borrow five times your salary, and we will
guarantee that last bit if things go wrong'. The
government will only have to pay anything if things do go wrong,
and the issuing of the guarantees themsevles won't count as
spending. The Chancellor is trying to tread a fine line
between not adding to the deficit while giving genuine assistance
to infrastructure.
The second initiative is a time-limited temporary lending
facility of up to £6bn for major Public-Private Partnership
(PPP) projects that don't have enough private lending.
The third is a £5bn export refinancing facility that will
start at the end of the year.
The three initiatives are grouped together under the banner
'UK Guarantees', and so far this consists of the press
release and an email address to apply to (infrastructureuk@hmtreasury.gsi.gov.uk).
The proof of the success of this announcement will of course depend
on how much it is used, but even if it isn't resorted to it
could still increase confidence in the infrastructure financing
industry.
One phrase that stood out to me in the press release was in the
second paragraph: 'subject to legislation'. Although
applications are open now, it seems that legislative change is
needed before guarantees can be made.
Incidentally, this blog had its third birthday on Tuesday, and
having clocked up 366 entries in that time, represents an entry
every three days. Infrastructure is rarely out of the news
and the Planning Act regime is still bedding in and being tweaked,
so it is likely that there will be plenty more to blog about in the
coming months - and years?
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