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Roads set to gain from Osborne’s £5bn infrastructure boost

By Richard Johnstone | 5 December 2012

England’s road network will be improved under Chancellor George Osborne’s plans for a ‘revolution’ in Britain’s infrastructure, but he has been criticised for cutting departmental spending to pay for the schemes.

In today’s Autumn Statement, Osborne announced additional cuts to Whitehall budgets – of 1% in 2013/14 and 2% in 2014/15 – to fund a £5bn boost to capital investment.

Among the projects backed are four major road improvement schemes. A total of £685m has been earmarked for investment in the A1 in the northeast, the A30 in the southwest and the M25 motorway around London.

An extra £333m will also be made available for ‘essential maintenance’ across both the national and local road networks.

Additional cash has also been found to invest £1bn into school building projects, including the construction of 100 new free schools and academies to support the coalition’s education reforms.

These investments were ‘exactly what a government equipping Britain to compete in the modern global economy should be doing’, Osborne said.

In addition, the Treasury would guarantee loans being taken out by the Greater London Authority to pay for the extension of London Underground’s Northern Line to Battersea.

This forms part of the UK Guarantee scheme, which will provide £40bn of support to developments that have stalled because of adverse credit conditions. Confirmation of the guarantee for the Tube extension takes the total of loans allocated so far to £10bn.

Osborne also revealed details of the government’s plan to reform what he called the ‘discredited’ Private Finance Initiative.

Despite the scheme’s intention to pass on risks in building new schools, hospitals and roads to private contractors, it was now clear ‘the public sector was sharing the risk’, he added. The new scheme, to be called PF2, will ensure ‘we also share in the reward’.

Under the new rules, the government will become a shareholder in PFI firms managing schemes to ensure ‘a more collaborative approach to improving project performance and managing risk’. As a ‘minority public equity co-investor’, the Treasury will also introduce greater competition for investors to ensure long-term funding is found at the best interest rates.

‘Taken together, this is a revolution in the sources of finance for upgrading Britain’s infrastructure and equipping Britain to win in the global race,’ Osborne added.
The government will also implement the recommendation in Lord Heseltine’s growth review to create a single funding pot for local transport, housing and skills that can be devolved to Local Enterprise Partnerships from April 2015.

Responding to the statement, the Campaign for Better Transport said vital public spending budgets were ‘being cut to pay for damaging roads schemes’.

Richard Hebditch, the pressure group’s campaigns director, added the government’s ‘great plan’ to use private finance to build or upgrade roads was ‘a damp squib’.

He added: ‘Maintaining our roads should always be the priority over new building. We’re pleased the chancellor has heeded our call for better maintenance to do just this. The £330m earmarked for this is a start but must be used to improve conditions for cyclists and pedestrians too.’

However, business group the CBI said the economy had been ‘crying out for real action on infrastructure’.

Director general John Cridland urged ministers to make the additional funding available as quickly as possible. ‘The government now has everything to prove by delivering. Businesses need to see the chancellor’s words translated into building sites on the ground.’

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