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Chancellor George Osborne Backs £50bn Economy Boost

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The chancellor said the government has earned credibility on tackling the deficit
The chancellor said the government has earned credibility on tackling the deficit

The government will underwrite up to £50 billion of investment in UK infrastructure and exports, under plans unveiled by George Osborne on Wednesday.

The chancellor said he was using the coalition's "hard won fiscal credibility" to free up private sector funds and kick-start the economy.

The huge initiative comes amid mounting pressure on ministers to support UK plc by loosening the purse strings. Earlier this week the IMF again cut the country's growth forecasts to just 0.2% for 2012.

However, the move will fuel criticism that the British taxpayer is taking on liabilities that the private sector considers too risky.

Under the UK Guarantees scheme, up to £40 billion of funding will be underwritten for critical infrastructure projects that have stalled due to difficulties raising money from private investors.

The government will charge for helping secure finance for the projects, which could be in sectors such as transport, energy, communications, and education.

Applicants will have to meet criteria including being ready to start construction within 12 months, having a positive impact on economic growth, and giving good value for the taxpayer.

The first guarantees are expected to be made in the autumn.

The government will also step in to ensure major Public Private Partnership (PPP) projects are not delayed.

PPP schemes get all their up-front funding from the private sector.

But for the next year the state will lend up to £6 billion to some 30 projects as an "exceptional response to difficult market conditions".

The loans, funded from departmental capital budgets, will be made on commercial terms, and only for a minority of the overall project cost.

Mr Osborne and Treasury chief secretary Danny Alexander also announced a £5 billion export refinancing facility would be launched later this year.

The sectors benefiting could include aerospace, oil and gas extraction equipment, transport and telecommunications infrastructure services, and hospital construction and management services.

Mr Osborne said: "The credibility the government has earned through tackling the deficit is already helping millions of British families and businesses through keeping down the cost of borrowing.

"Now 'UK Guarantees' will use that hard won fiscal credibility to provide public guarantees of up to £50bn of private investment in infrastructure and exports.

"Britain's credibility has been hard won and involved difficult decisions, so I want to make sure its benefits are passed on to the whole economy."

Liberal Democrat Mr Alexander said: "The measures we're announcing today will help work get started on many important infrastructure projects and help our major exporters, providing lasting benefits for thousands of people and a significant boost to the economy.

"This is yet another example of the Coalition working together to put its hard-earned economic credibility to work to increase growth. "