Osborne in hunt for growth plan

CHANCELLOR George Osborne is in talks with institutional investors about getting private cash to fund billions in infrastructure projects as part of a desperate bid to get the economy moving despite the global debt crisis.

Among the ideas being mulled by HM Treasury is the establishment of an infrastructure investment fund to channel private money from pension and mutual funds into building toll roads, houses and power plants.

Adam Marshall, policy director at the British Chambers of Commerce, told City A.M.: “A single investment vehicle is a possibility, though it may be a single fund or several project by project, or sector specific.”

But he added that the initiative “needs to include a deregulation of planning, with separate approval from ministers for major projects” to create an attractive investment environment.

The scale of the potential funds is also not clear despite reports suggesting that Osborne could target £50bn over an undetermined time period.

The infrastructure focus will form one part of a broader package that the Treasury hopes will stimulate growth while sticking to its deficit reduction plan.

Among the other measures likely to be in the growth package unveiled in two weeks are:

• A “credit easing” scheme that will channel public money into small business loans to cut the cost of credit. As City A.M. revealed on Friday, banks have pitched a £4bn scheme, with the government fronting up to £800m.

However, both banks and Bank of England executive director Andrew Haldane argue that it is more important to adjust capital rules so that lending to small firms is more attractive for banks in the long-run.

• A partial merger of national insurance and income tax to simplify firms’ tax returns and make the true rate of tax more transparent.

• Some tax relief for energy-intensive firms, as revealed by City A.M. last month. This could involve exempting some from the floor on carbon pricing.

• An overhaul of the planning system to create a presumption in favour of letting projects go ahead.

• Employment law reforms to make hiring people cheaper. But the Liberal Democrats have vowed to temper Downing Street’s central policy recommendation, which is to let firms get rid of workers for being unproductive.

• Another possibility is that the Treasury acts on talks with banks over tweaking the UK’s liquidity rules to be less strict by, for example, indicating behind the scenes that it would be supportive of a more liberal Bank of England governor when the time comes to replace Sir Mervyn King.