With the government said to be desperately seeking “cost-free” ways of lifting growth that do not threaten the deficit and debt reduction plan, the Prime Minister revealed during a speech to the Institute of Directors that he has instructed the Treasury to consider using state guarantees “to boost credit for business, housing and infrastructure”.
The idea of using state guarantees to boost credit for business, housing and infrastructure would see private sector borrowing wrapped with state insurance, so that companies would be able to raise funds more cheaply to invest in projects that might otherwise have been uneconomic.
The Treasury have already used such a policy for its credit-easing plan to boost lending to small businesses and a Treasury source has said there was no reason why more taxpayer money could not be used on such schemes as the “contingent liability” only becomes a debt if the guarantee is ever called in.
During his speech, the Prime Minister described guarantees as a way of using “the hard-won credibility of the Government’s balance sheet to help the economy grow without adding even further to our debt”.
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