Gov't to tap pension funds for infrastructure boost
Ministers announce £25 billion investment into infrastructure projects to boost a stagnating economy
By CFOWorld.co.uk | CFO UK | Published 10:39, 28 November 11
The government is to use pension funds to pump £25 billion into infrastructure projects to boost a stagnating economy, Treasury minister Danny Alexander said on Monday, a day before the chancellor delivers his Budget update.
An injection of funds from Britain's big pensions allows the government to invest in much-needed infrastructure projects such as roads and railways without borrowing more money.
Alexander told BBC Radio 4 an agreement had been signed with the big British pension funds to pump £20 billion pounds and an additional £5 billion of government money would be shifted towards these projects over the current parliament by 2015, he said.
The government would not be borrowing any additional money, he said.
The plans are the latest in a drip feed of government announcements ahead of chancellor George Osborne's autumn statement on Tuesday when lower growth forecasts are set to be announced as the euro zone crisis bites.
Osborne announced measures on Sunday to underwrite £20 billion of loans to smaller companies which are struggling to get credit.
Alexander said that the government would reallocate £5 billion of spending to capital projects by 2015 but crucially added that a deficit-cutting coalition would not borrow any more.
"Through working with British pension funds, we're identifying ways to unlock around £20 billion of pension fund investment to go into privately funded infrastructure," Alexander told BBC Radio 4.
Pension funds are looking to ensure better returns after yields on British government bonds or gilts fell following buying by the Bank of England and by investors seeking a haven from euro zone turmoil.
Britain's plans got a boost on Monday when the head of China's sovereign wealth fund said the country was keen to invest in the ailing infrastructure of Western countries, especially Britain.
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