UK Treasury Defends Flagship Investment Scheme Critics Brand 'Disappointing'
By Shane Croucher | February 5, 2013 1:46 AM EST
The Treasury has insisted its flagship infrastructure scheme, which sees the taxpayer underwrite the finances of nationally significant projects in order to stimulate activity and lift the economy to recovery, will gain traction this year after a business group branded its progress disappointing.
Roger Salomone, head of business environment at manufacturing organisation EEF, told The Times that the UK desperately needs infrastructure investment, but that he was "disappointed with the slow progress" of the UK Guarantees Scheme, which is worth up to £40bn.
"Time is of the essence. It was designed as a shot in the arm for the economy, so if it hasn't started delivering by the Budget, then it needs to be reviewed," Salomone said.
A Treasury source told IBTimes UK that officials and ministers "don't think we're behind track on this at all".
"We think we've had a good response to it and would expect in the next financial year to start making more guarantees," they said.
According to the same report in The Times, the strict eligibility regime for approval under the UK Guarantees Scheme, which is worth up to £40bn, is making it difficult for infrastructure projects to qualify for the government's help.
To be approved for the scheme's support, an infrastructure project must be nationally significant, ready to start work within a year, have equity finance committed, and of good value to the taxpayer as measured by the Treasury.
"Projects are still coming forward. I don't really think that the criteria is putting people off," said the Treasury source.
"It's just a question of when the projects will be ready to go."
The source added that legislation approving the scheme had only received royal assent at the end of October and that national infrastructure projects take time to secure finance and planning approval, which can hold up work.
Around 14 projects, worth £10bn, have pre-qualified for help from the scheme and are currently undergoing assessment and due diligence by the Treasury.
It has already been announced that the winning bidder to provide rolling stock for Crossrail, a new rail line being constructed across London which is due to be finished in 2018, will have access to the scheme.
No preferred bidder has yet been identified.
Chancellor George Osborne has also pledged £1bn of the scheme's support to the Northern Line extension to Battersea on the London Underground.
As well as the UK Guarantees Scheme, the government has also pledged £10bn of lending guarantees to homebuilders in order to stimulate a new wave of house building across the country.
Limited housing stock has held house prices high and sent rental costs soaring in recent years.
Ministers are hoping that this financial support will lead to the creation of new affordable homes as well as private rental accommodation, as well as help the economy grow by creating jobs.
Some critics argue that only offering guarantees is not enough and the government should launch a fiscal offensive in the beleaguered economy, by investing directly in a new generation of social housing, as well as other major infrastructure projects.
They also say that the government must act quickly if the country is to avoid a triple-dip recession following a contraction in the fourth quarter.
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