It was the Sunday Times which broke the news on November 13 of “Osborne’s £50bn plan for growth“. The newspaper revealed that the chancellor had devised a major infrastructure programme funded by private sector money to boost the flagging economy.
It described a “£50bn housing and road-building boom” through harnassing the wealth held by pension fund managers and insurance companies.
The Sunday Times did remark that the plan was a cunning attempt to lever in loads of money without affecting the nation’s balance sheet, as I explained on Thursday. “We will not be changing the government’s capital spending envelope and we will not be issuing new bonds to fund this,” a Treasury source told them.
But the £50bn figure has turned out to be not quite what it seemed. We reveal in today’s FT that Monday’s big announcement revolves around a memorandum of understanding (not a firm deal) between the Treasury and four pension funds and fund managers.
The four groups have £50bn of assets between them; this appears to be where the figure has come from. As yet none of the four* has yet said how much money they will invest in any forthcoming grand plan. If they decide to put in anything – and it is still “if” - it will inevitably be a small percentage of the huge flows of money they manage, given the onus on them to ensure diversification in a wide spread of investments.
* Hermes GPE, the Greater Manchester Pension Fund, the London Pensions Fund Authority and Meridiam Infrastructure
Jim Pickard
Kiran Stacey