The Chancellor George Osborne, ahead of his autumn economic statement later this month, has talked about a plan for longer-term growth in the British economy, through an increase in financial support for the housing market and a boost for public sector infrastructure projects, including e.g. power stations, social housing construction, super-fast broadband telecommunications networks and toll roads. In addition, 40 infrastructure projects already approved will be brought forward for rail, road and national electricity grid improvements.
This growth plan, devised by the Treasury and the Department for Business, Innovation & Skills, aims to attract private sector financing from institutional investors such as pension funds and insurance companies looking for a safe return e.g. from traditionally safe public utility-type assets, where a stable regulatory framework can be guaranteed. A key question from such investors is then what type and level of government guarantee and/or risk sharing is proposed to attract and protect their private sector investment? Work then continues on creating an appropriate investment scheme to attract private finance but which will not undermine the current triple-A credit rating of the UK by increasing official government borrowing figures.
However, the most immediate problem is the current lack of growth in the economy which the government seems to be mainly attributing to short-term weaknesses in the Eurozone. Therefore, the Chancellor at the end of November, will also announce proposals for a so-called credit easing to boost lending to small and medium enterprises, with a medium-term plan to access the financial markets directly (i.e. by means other than the banks) through specialist small business funds. That said, despite the EU/Eurozone representing over 50% of UK exports, this trading bloc will remain a mature market with modest growth rates when it recovers, compared with China, India, Brazil, Russia, Turkey etc. , all fast developing markets where the future for British exporters must lie.
The opposition Labour party is also waiting in the wings with its opportunistic leader Ed. Miliband urging ministers to change course away from economic austerity (the currently termed Plan A), Labour having calculated that, due to the lower than predicted growth in the economy, the government will be forced to over-borrow an accumulated £100 billion or more by 2015. Therefore, Labour is again waving its 5-Point Plan (refer to Categories/ Chairmans Blog/Labour 5-Point Plan in the right-hand index column) to boost the economy despite providing no real details, apart from a further £2 billion raised by an additional tax on bank bonuses, on how these growth policies would be costed without adding substantially to the existing UK deficit and dragging the economy further downwards.
If the government holds its nerve and can generate some growth in the economy in the period before 2015, its Plan A could be viewed by the public as more a Plan A+!