In an effort to stimulate economic growth HM Government has announced plans to underwrite up to £40 billion of infrastructure projects in the United Kingdom through a new scheme called "UK Guarantees".


The UK Guarantees scheme (the Scheme) was initially announced in July 2012.  However, the Parliamentary summer recess has meant that the Infrastructure (Financial Assistance) Bill which provides the statutory framework for the Scheme was only published on 6 September.

The Scheme was conceived to try and stimulate investment in UK infrastructure projects in market conditions where project sponsors are facing difficulties obtaining project finance. The Scheme would see Government support the funding of certain infrastructure projects by underpinning construction, operational or revenue risks.

Statutory Framework

The Bill contains only four substantive provisions and is modelled on earlier legislation which authorised Government to provide financial support in connection with the development of the Thames Tideway Tunnel in London. Surprisingly, the Bill does not contain any provision empowering the Chancellor to issue secondary legislation establishing the operative details of the Scheme.

The key provision in the Bill authorises the Treasury, or the Secretary of State with Treasury consent, to incur expenditure in providing "financial assistance" to any person in connection with the provision of infrastructure. The form of financial assistance able to be provided by Government is not restricted to just guarantees or other forms of sureties but also includes loans, indemnities, and any other kind of financial assistance (actual or contingent).  The broad nature of the support which may be provided raises issues of State aid and the potential need for European Commission approval.  Government has not made any public statements as to how it envisages the Scheme addressing this issue, although there are indications that the Treasury will expect a return on any financial assistance provided which could result in certain State aid exemptions being available.

The Bill provides that the amount of expenditure and actual or contingent liabilities incurred in giving, or in connection with giving, infrastructure assistance (less any sums received by the Treasury or the Secretary of State in connection with infrastructure assistance) is capped at £50 billion, although Government has given itself the right to increase, but not decrease, this amount through secondary legislation.

The Bill sets out a non-exhaustive list of matters that fall within the definition of "infrastructure". The list includes:

  • water, electricity, gas telecommunications, sewerage or other services;
  • railway facilities, roads or other transport facilities;
  • health or educational facilities;
  • court or prison facilities; and
  • housing.

Government has indicated in its public pronouncements that £40 billion is to be available for general infrastructure projects and £10 billion is to be available for housing construction. It is not clear how the Office of National Statistics will treat Treasury's contingent liabilities under the scheme in preparing the national accounts and whether they would be treated as "off-balance sheet".

The UK Guarantees Scheme

When launching the Scheme in July this year, Government announced that in order to be eligible for financial support, an infrastructure project would need to satisfy the following criteria:

  1. Nationally Significant – the infrastructure project must be one of those projects identified in the National Infrastructure Plan 2011 (which form part of the Government's national infrastructure project pipeline). Other exceptional projects of national or economic significance will be considered on a case-by-case basis.
  2. Construction ready – the infrastructure project must be ready to commence construction within 12 months of a guarantee being granted and have obtained (or be at the point of obtaining) the necessary planning and other consents.
  3. Financially credible – equity finance must have been committed to the project and sponsors must be willing to accept appropriate restructuring of the project to limit any risk to the taxpayer.  While this is unlikely to require sponsors to agree to reimburse any financial support provided by Government, it is likely that they will be subordinated so that the Government will rank in priority to them.
  4. Dependent on guarantee and not otherwise financeable within a reasonable timeframe – this implies that reasonable efforts must have been made to try to finance the project privately without recourse to the Scheme.
  5. Good value for the taxpayer – the infrastructure project must have acceptable credit quality and not present unacceptable fiscal or economic risks.

These criteria are not reflected in the Bill, which is silent as to the eligibility requirements for infrastructure projects seeking financial support from the Treasury.  If an infrastructure project is considered to have satisfied the criteria, it is anticipated that the Treasury will undertake due diligence on the project before deciding on the level of support to be provided.

As the level of financial support will be determined and then agreed on a case-by-case basis the timescales for obtaining Treasury approval for financial support, and any on-going role of the Treasury in monitoring the project, are unclear.  It remains to be seen whether the Treasury can structure and operate the Scheme so that the effects can start to be felt sooner rather than later.


Government intends to ask Parliament to expedite the parliamentary progress of the Bill, with provision made for amendments to the Bill to be introduced prior to the Second Reading (scheduled for 17 September 2012).  The Treasury claims the Bill will give the green light to £40bn of infrastructure projects by using Government's low interest rates to underwrite them. What real impact the Scheme will have remains to be seen.