28 Nov 2011

How certain is Osborne’s ‘£30bn’ spend?

How does George Osborne get to an eye-catching “£30bn” total for new infrastructure spending? To what degree is he, as The Spectator used accuse Gordon Brown, “telling Brownies” – puffing up numbers for effect?

There is £5b over three years of government spending committed on top of the existing (shrunken) capital spending plans (the money to come from squeezes in other spending including tax credits). Then things get a bit foggier. There is a promise of £5bn extra capital spending way off in the next parliament, for which there is no spending round as yet – nothing to be dug or built until several years hence.

Then there is the £20b to be invested in infrastructure by pension funds over a decade or so. We are at the talks stage here. As a Treasury source said to me: “We haven’t worked out exactly how this is going to work.” The hope is that you can find a way of getting private investment in infrastructure that is cheaper than the PFI (often around 8 per cent) and (unlike government bonds) doesn’t appear as debt no the government books. (The FT’s excellent Westminster blog explains what they’re trying to put together).

This is a medium- to long-term plan and by no means “cooked”. A Whitehall source tells me that we can be sure, even in the best case scenaro, that nothing will be spent on infrastrastructure through this new, yet-to-be-built investment vehicle in 2011 or 2012. You could, a source said, get some commitments before 2013 but you wouldn’t get money spent before then.

Look out tomorrow as well for a “National Infrastructure Plan” with 500 infrastructure plans listed. I asked at the Treasury if anything in it would be new. “You could say they’re not new but lots of people in business don’t appear to know about them, so we are putting them in one publication.”

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