Finance: Loan Guarantee Scheme

Lord Peston Excerpts

Tuesday 24th July 2012 Lords Chamber

[Lord Sassoon]

My Lords, the £40 billion infrastructure guarantee scheme is linked to nationally significant infrastructure projects. Typically, the promoters of those projects will not be SMEs, but of course there will be very many SMEs in the supply chain for the projects that will benefit. SMEs working in the public/private partnership space will also benefit from a possible £6 billion of additional loans that was also announced in this package, as will exporters, for whom a £5 billion export refinancing facility will be extended.

[Lord Peston]

My Lords, it is obvious that this loan guarantee scheme must involve immense risk because if there were no risk involved, the guarantee would not be required. How will the costs of meeting those risks enter into the public accounts, or will the Government try to fiddle the figures so that they do not eventually appear as public expenditure?

[Lord Sassoon]

My Lords, there will be no fiddling of the numbers by this Government on this or anything else. The position is very straightforward: the financing markets for these projects are extremely difficult but good projects are coming forward in the pipeline, and the beauty of the scheme is that we can use the strength of the government balance sheet. To answer the technical question, the infrastructure guarantees will be financial transactions and will have no impact on PSNB. A project would have an impact on PSND only if there was a non-negligible expected loss, which is not something that we anticipate. The guarantees will generally count as contingent liabilities, and that is very clear.