The government said today it would support public building projects worth billions of pounds at risk of being stalled by the credit crisis.
"The action will ensure that crucial and valuable public investment will not be disrupted by problems in the financial markets. In total, 13 billion of public investment in procurement will be safeguarded," Chief Secretary to the Treasury Yvette Cooper said in a statement.
The projects are funded by the Private Finance Initiative (PFI) scheme under which private sector funding and expertise are brought in to help give value for money for public works.
"From today the Government will lend to those PFI projects that cannot raise sufficient debt finance on acceptable terms, lending alongside commercial lenders and the European Investment Bank," Cooper added.
"Equity investors will continue to bear the primary risk in these projects and, where available, private sector debt will continue to be provided," she added.
The exact level of government support was not specified, but this is counter to the purpose of keeping these debts off the public balance sheet, which was the basis of PFI.
Up to 2 billion had been expected to be made available during 2009/10, managed by a dedicated team in the Treasury and going to projects that have been unable to raise all the funds they require from banks and private sources.
The package was expected to be financed with unspent funds from government departments, rather than with any new borrowing.
In a separate statement, the government said it was bringing forward by one year almost a billion pounds of spending to improve the country's schools.
"I am today announcing that 919 million pounds of capital spending on schools and children's play areas will be brought forward from 2010/2011 to 2009/10," Schools Secretary Ed Balls said in a statement.
The credit crunch has frozen debt markets and made banks reluctant to lend, especially over long periods, meaning several privately-financed and operated infrastructure projects have stalled.
The government hopes the support measures will boost efforts to pull Britain out of its first recession since the early 1990s.
Britain's economy shrank by 1.5% in the three months to December, the sharpest decline since 1980, and is expected to contract for much of this year.
The construction sector has been hit particularly hard, resulting in thousands of job cuts.
While some infrastructure projects have been able to source all the funding they need, the government feels it has to act now to stem job losses.
The government has already launched a series of measures to try to kick-start bank lending, including an offer to insure losses arising from risky assets and by injecting billions of pounds into the banking system.
It also announced a 20 billion fiscal stimulus plan in November aimed at reducing the severity of the recession and speculation is growing that another stimulus could be on the way in the April budget.
No comments:
Post a Comment