£1bn guarantee to unlock Northern Line extension part of wider bid to boost infrastructure in Autumn Statement
A government guarantee for a £1bn loan to enable the mayor of London to fund the Northern Line extension was the most eye-catching of a series of infrastructure announcements unveiled in the chancellor’s Autumn Statement this week.
The Treasury said the UK Guarantee would allow the mayor of London to borrow £1bn at a new preferential rate from the Public Works Loan Board to support the Northern Line Extension. The extension is critical to the realisation of the £8bn Battersea Power Station redevelopment, as well as the wider regeneration of the Vauxhall and Nine Elms area.
The government had previously backed the use of tax increment financing (TIF) and an enterprise zone to help fund the development of the Northern Line and this week the mayor of London’s office said it would use the TIF mechanism to pay off the £1bn loan after the development had been built out.
The Treasury said the Northern Line extension was one of 14 major infrastructure schemes, valued together at £10bn, that had pre-qualified for government-backed guarantees under the UK guarantees scheme.
Treasury said the UK Guarantees scheme had received 75 enquiries from project sponsors to date and that the 14 projects included the guarantee for £1bn of Crossrail rolling stock, previously announced, but did not include the £4.1bn Thames Tideway Tunnel - dubbed the London “super sewer” - which has been tipped as a project likely to be given a guarantee. The Treasury would not provide further detail on the 14 pre-qualified schemes.
The Autumn Statement also included a £5.5bn capital boost for infrastructure projects, including £1bn for schools, as well as £270m for further education colleges.
Osborne said the government would also commit £1bn to major road projects, including four major schemes: upgrading key sections of the A1; bringing the route from London to Newcastle up to motorway standard; linking the A5 with the M1; dualling the A30 in Cornwall; and upgrading the M25, to support the Thurrock port development. An additional £333m on repair and maintenance of the UK’s road network between now and 2015 will be funded from the same £1bn pot.
Osborne also announced a £600m boost for scientific research infrastructure.
The chancellor said the £5.5bn would be funded through cuts across Whitehall bureaucracy, with departments asked to cut their budgets by 1% in 2013-14 and 2% in 2014-15. This is expected to release £1bn in the first year, and £2.5bn the second year, leaving £1.5bn of savings still to be finalised.
Other key announcements in the Autumn Statement
A new £574m local infrastructure fund that includes:
- £60m to support infrastructure in a limited number of enterprise zones
- £225m of funding, announced by deputy prime minister Nick Clegg earlier this month, to unlock the development of stalled housing sites
- £190m to be used to de-risk public land and enable the quicker disposal of surplus sites for new homes
- £100m to help bring forward more public sector sites for development
A new gas strategy
The government is calling for 26GW of extra gas generating capacity by 2030 - the equivalent of 30 new plants. Some of the 30 new plants will be created by modernising existing power stations.
Empty property tax
Developers to be given an extended “grace period” free from paying business rates on empty properties from October 2013. The grace period will be extended from six months tax-free to 18 months tax-free, up until a cut-off point of 30 September 2016.
Paul Deighton’s role
Paul Deighton, who was appointed commercial secretary to the Treasury in September, will head up a review of the delivery of government infrastructure projects when he takes on his new role in the New Year. Treasury said Deighton would “undertake a detailed assessment of Whitehall’s ability to deliver infrastructure”, with the aim of strengthening the mandate of Infrastructure UK and boost its ability to deliver projects as part of its drive for growth.The review will be completed by the time the chancellor delivers the Budget in 2013.
Public works loan
The government to make available a new concessionary public works loan rate to an infrastructure project nominated by each Local Enterprise Partnership (LEPs), excluding London, with the total borrowing capped at £1.5bn
LEPs
The government to devolve a greater proportion of growth-related spending on the basis of the strategic plans developed by LEPs, with the aim of creating a single funding pot for local areas from April 2015, as well as providing £10m per year for each LEP to build their capacity.
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