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Monday
Nov282011

Osborne's £5bn Cuts To Pay For Building Plans

George Osborne

George Osborne has confirmed £30bn will be spent on roads and schools as he attempts to "weather the storm" of the stalling economy.

In Tuesday's Autumn Statement, he will announce a further £5bn in public spending cuts tomorrow, to raise money for a major building projects.

It comes as the Organisation for Economic Cooperation and Growth predicted Britain would return to recession next year and will need to print more money.

 On a visit to a London building project on Monday, he confirmed more cash would be spent on infrastructure.

 "Some of the money will come from the Government, from savings we're going to identify and I'll set those out tomorrow.

 "Much of it is going to come from the private sector and pensions funds so we use British savings to invest in British jobs and British building.

 "So I think it is the right thing to do at a time like this, we've got to take our country through these difficult times, we've got to weather the storm, we've also got to lay the foundations of future economic success."

Money will be spent on new schools, roads, high speed broadband and power stations in a bid to help businesses and generate thousands of jobs and create 40,000 new school places for pupils.

But Treasury sources have made it clear that the deficit reduction plan will not be compromised and the money will be raised from "savings in other areas".

A deal struck with pension funds will see £20bn invested in the decade-long programme.

 The first £5bn will come from spending cuts during the current spending period - up until the financial year 2014-2015.

 A further £5bn will then come from spending cuts in the following spending period.

Money could be raised by squeezing benefits for those on low incomes and imposing a further levy on the banks.

 Mr Osborne said: "British pension funds have not been investing the savings of British people in British infrastructure. Now we are hopefully going to change that.

 "We have signed an agreement with the big pension funds that will see them investing British savings in British infrastructure, building an economy based now on savings and investment rather than on debt."

Foreign investors, for example a state-owned asset fund from China, may also play a bigger role.

Chief Secretary to the Treasury Danny Alexander told Sky News: "Just like British firms invest in infrastructure overseas, we're encouraging overseas organisations to invest in infrastructure in this country, and if the Chinese sovereign wealth fund is going to join that, then that is potentially a very significant boost to the British economy."

The Chancellor will set out his plans against the backdrop of a worsening economic outlook, with the Office for Budget Responsibility expect to downgrade its official growth forecast for this year for a second time to around 1%.

They are also expected to increase their forecast for the number of public sector job losses.

Ahead of Tuesday's Autumn Statement and Wednesday's public sector strike - there will be a special two-hour edition of Jeff Randall Live between 7pm and 9pm on Sky News HD.

The Autumn Statement is also expected to include a credit easing programme in which the Treasury will underwrite loans of up to £40 billion to small businesses in a bid to boost bank lending.

Other help will be directed at the "squeezed middle" of people struggling with high living costs.

Rail fares will be capped at a 6% average rise in January and there is speculation that Mr Osborne may also scrap the planned 3p rise in fuel duty.

First-time buyers will be helped by a £400m fund to help housebuilders deliver up to 16,000 new homes and an indemnity scheme to help 100,000 buyers get mortgages with a 5% deposit.

And a £1bn scheme will provide training and subsidised employment for young people struggling to find work.

 

Commenting ahead of Tuesday's update on the economy, Labour leader Ed Miliband called on the Chancellor not to tighten the "squeeze" on families already facing a "quiet crisis".

He will also attacked reports that Mr Osborne is considering freezing tax credits for people working on low incomes.

"What a symbol that would be of the wrong choices this government is making." Mr Miliband he said before a question and answer session in an Asda supermarket.

"Finally waking up to the problem of youth unemployment and paying for it by hitting the lowest-paid working families," he added.

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