Chancellor George Osborne has unveiled a government plan to underwrite up to £50 billion of investment into UK infrastructure and exports.

Under the UK Guarantees scheme, up to £40 billion of funding will be underwritten for nationally-significant projects in areas such as energy, transport and communications that can start within 12 months. The Government’s hope that the private sector would raise enough money to fund such projects has not materialised.

Bids for the £40 billion pot will be invited today by Infrastructure UK, a treasury body set up in the Emergency Budget in 2010. It will approve the first guarantees in the autumn.

30 stalled public-private partnership projects are also set to get a £6 billion boost as the government steps in to ensure there are no delays.

Mr Osborne said:

"Britain's credibility has been hard won and involved difficult decisions, so I want to make sure its benefits are passed on to the whole economy.

"Now 'UK Guarantees' will use that hard won fiscal credibility to provide public guarantees of up to £50bn of private investment in infrastructure and exports.”

The Treasury insists that the stimulus will not add to public debt because it would only cost money if loans are not repaid. A thorough vetting process is in place to ensure that schemes are value for money.

John Cridland, CBI Director-General, said:

"This announcement marks a big step towards unlocking the £250 billion of investment needed to renew our national infrastructure, two-thirds of which has to come from the private sector. The Government has produced a package of measures that will use the public balance sheet to underwrite private finance, building on the ideas put forward by business.

“With bank lending still constrained, we must make it attractive for new finance providers to step in and fill the gap.  A combination of direct lending and loan guarantees should help to make infrastructure assets more attractive while protecting our fiscal position.  Pension funds and other investors will be encouraged by the Government’s attempt to reduce risk by using its funding power to boost the investment grade of a range of projects.

“While the Government’s proposals address infrastructure financing, we now need to focus on project models to ensure delivery of the world-class infrastructure this country needs.”

It will be interesting to see whether any flood defence projects will see any of this money, given the increased role that the private sector is expected to play as government struggles to meet the costs of providing flood defence in light of climate change.