Embattled Britain sells assets
Chief Secretary to the Treasury Danny Alexander said £10 billion would be generated by selling corporate and financial assets such as the mortgage-style student loan book, along with £5 billion of land and property. He pledged £300 billion of capital spending by the end of the decade, including the construction of the high-speed rail link from London to northern England.
"Government is the custodian of the taxpayers' assets," Mr Alexander said. "When we no longer need them, we should sell them back at a fair price - not act like a compulsive hoarder." Mr Alexander gave specifics about £100 billion of spending proposals after Chancellor of the Exchequer George Osborne had previously set out £11.5 billion of budget reductions for 2015-16.
The British government has extended its austerity program to 2017-18 amid weaker-than-expected economic growth.
The investment program did not reflect an increase in net capital spending, the independent Institute for Fiscal Studies said, adding Mr Osborne's announcement had been accompanied by "woeful" levels of information and explanation. Most spending plans were already known, IFS director Paul Johnson said.
"We are hardly entering a new era of massive infrastructure investment," Mr Johnson said. "Despite the hype, net capital spending is not set to rise."
Public-sector net investment would fall in 2015-16 to 1.5 per cent of gross domestic product from 1.6 per cent in 2014-15, Mr Johnson said. The IFS projects it will also fall further as a share of national income in the two following years.
The government hopes infrastructure investment will help spark the recovery it needs to meet austerity targets. The deficit-cutting program, the most ambitious since World War II, has helped keep bond yields low. Ten-year gilts yielded 43 basis points more than German bunds, on average, since the Conservative-led coalition took office in May 2010. The bond yield was 96 basis points the day before the election.
Mr Alexander set a budget of £42.6 billion for construction of the north-south rail link and said £7.5 billion would be spent on rolling stock.
He also announced a £28 billion investment in roads, an expansion of the broadband network and additional spending on boosting renewable energy.
"As we move from repair to renewal, we also need to invest in the fabric of our nation," he said.
Frequently Asked Questions about this Article…
The British government plans to sell £15 billion of state-owned assets by 2020, including about £10 billion from corporate and financial assets such as the mortgage-style student loan book, and about £5 billion of land and property.
Officials say the asset sales are intended to help bring down the government’s debt. Selling assets the state no longer needs is presented as a way to raise cash and reduce borrowing rather than hold assets indefinitely.
The government pledged up to £300 billion of capital spending by the end of the decade, with specifics including a £42.6 billion budget for the north–south rail link (HS2), £7.5 billion for rolling stock, £28 billion for roads, an expansion of the broadband network and additional spending to boost renewable energy.
Independent analysis from the Institute for Fiscal Studies (IFS) said the investment program did not reflect an increase in net capital spending. The IFS noted that most spending plans were already known and warned that net public-sector investment was set to fall as a share of GDP (projected to drop to 1.5% in 2015–16 from 1.6% in 2014–15).
The asset sales and infrastructure announcements sit alongside an extended austerity program running to 2017–18. Chancellor George Osborne had previously set out £11.5 billion of budget reductions for 2015–16, and the government says the investments are intended to help spark a recovery needed to meet austerity targets.
The IFS criticised the announcement for offering 'woeful' levels of information and explanation, saying the package was not evidence of a new era of massive infrastructure investment and that net capital spending was not set to rise.
The article notes that the deficit-cutting program has helped keep bond yields low. Since the Conservative-led coalition took office in May 2010, ten-year gilts yielded on average 43 basis points more than German bunds; by comparison, the spread was 96 basis points the day before the election referenced in the article.
Key timelines and figures in the announcement are: £15 billion of asset sales to be completed by 2020 (£10 billion corporate/financial, £5 billion land/property); up to £300 billion of capital spending by the end of the decade; and specific budgets including £42.6 billion for the north–south rail link, £7.5 billion for rolling stock and £28 billion for roads.
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