Osborne backs £50bn economy boost

The Government will underwrite up to £50 billion of investment in UK infrastructure and exports under radical plans to be unveiled by George Osborne.

The Chancellor said he was using the coalition's "hard won fiscal credibility" to free up private sector funds and kick-start the economy.

The huge initiative comes amid mounting pressure on ministers to support the economy by loosening the purse strings. Earlier this week the IMF again cut the country's growth forecasts to just 0.2% for 2012.

However, the move will fuel criticism that the British taxpayer is taking on liabilities which the private sector considers too risky. Under the UK Guarantees scheme, up to £40 billion of funding will be underwritten for critical infrastructure projects that have stalled due to difficulties raising money from private investors.

The Government will charge for helping secure finance for the projects, which could be in sectors such as transport, energy, communications and education. Applicants will have to meet criteria including being ready to start construction within 12 months, having a positive impact on economic growth, and giving good value for the taxpayer. The first guarantees are expected to be made in the autumn.

The Government will also step in to ensure major Public Private Partnership (PPP) projects are not delayed. PPP schemes get all their up-front funding from the private sector. But for the next year the state will lend up to £6 billion to some 30 projects as an "exceptional response to difficult market conditions".

Shadow chief treasury secretary Rachel Reeves said: "With Britain in a double-dip recession because of the Chancellor's failed policies, anything which helps to get the economy moving again is welcome. But these proposals do not go far enough.

"There is no guarantee that government-backed loans will see any infrastructure projects going ahead in the next year which wouldn't have happened anyway. And they will not reverse the damage done by two years of deep cuts to long-term projects like house building and the school building programme which have seen a collapse in the construction sector."

Mr Alexander said the announcement showed "the door is open" for businesses which need cash, telling BBC Radio 4's Today programme: "Anyone who feels this would help, come and talk to us and we will turn it round very quickly."

He said £40 billion-worth of schemes in the pipeline could benefit from the money but insisted the strategy was "not about spending new money".