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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