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2011 Autumn Statement: finance implications
Practical Law UK Legal Update 6-514-1351 (Approx. 4 pages)
2011 Autumn Statement: finance implications
by PLC Finance
| Published on 30 Nov 2011 • United Kingdom |
Key announcements of interest to finance lawyers arising from the Chancellor of the Exchequer's 2011 Autumn Statement. (Free access.)
Speedread
The Chancellor, George Osborne, delivered his 2011 Autumn Statement on 29 November 2011. In his Autumn Statement, the Chancellor set out details of further action the government will take in attempts to protect the UK from global instability and the eurozone crisis. Of particular interest for finance lawyers are:
- Credit-easing measures for small and medium-sized enterprises.
- An increase to the bank levy.
- Government guarantee for private sector infrastructure funding.
- Government support for municipal bonds.
- Government indemnity fund for lending secured on new build homes.
- Reduction in the Asset Purchase Facility ceiling for private sector asset purchases.
The Chancellor, George Osborne, delivered his 2011 Autumn Statement on 29 November 2011. This update summarises the key announcements for finance lawyers.
For details of PLC's comprehensive coverage of the 2011 Autumn Statement, including links to tailored practice area updates, see PLC 2011 Autumn Statement.
In the Autumn Statement, the Chancellor set out details of further action the government will take in attempts to protect the UK from global instability and the eurozone crisis. HM Treasury also announced that it will publish draft legislation to be included in the Finance Bill 2012. For a table setting out the draft legislation that we are expecting to come out, see PLC Tax, Practice note, Tax consultations and legislation: what to expect on 6 December 2011 and for the rest of the year.
The following announcements in the Autumn Statement are of particular interest to finance lawyers.
Credit-easing measures for small and medium-sized enterprises
The government has announced plans for:
- £20 billion of guarantees for bank funding, to be made available over two years (subject to European state aid approval). This National Loan Guarantee Scheme is intended to lower the cost for banks of lending to small and medium-sized enterprises (SMEs) and will focus on new loans and overdrafts. In considering banks' access to the National Loan Guarantee Scheme, the government will assess banks' commitment to SMEs and whether reduced lending costs are being passed on to borrowers.
- A fund of up to £1 billion to invest in SMEs through non-bank channels. This Business Finance Partnership is intended to provide co-investment with the private sector through loan funds. The government will also explore further ways for SMEs to access non-bank funding.
- An extension of the Enterprise Finance Guarantee (EFG) from January 2012, to include businesses with up to £44 million annual turnover. New lenders will also be accredited to the EFG scheme. For background on the EFG scheme, see Legal update, Government announces measures to assist financing of small and medium businesses.
- Continuing the previously announced commitment to amend existing UK covered bond regulation to improve transparency for investors and increase their use by banks to raise funding. The FSA and HM Treasury published a joint consultation on covered bond regulation alongside the April 2011 Budget (see Legal update, FSA and HM Treasury consult on covered bond regulation).
Increase to the bank levy
The rate of the bank levy is to increase to 0.088% (from 0.078%) from 1 January 2012. This increase is intended to offset the shortfall in receipts for 2011 and future years. For background on the bank levy, see Practice note, Bank levy.
Government guarantee for private sector infrastructure funding
As part of its National Infrastructure Plan announced alongside the Autumn Statement, the government plans to provide up to £1 billion of government guarantees to private sector funding in specific infrastructure projects. Additionally, the government has expressed its appetite (subject to affordability) for using other forms of guarantee to support specific projects where investors and the private sector may not always be able to bear exceptional project risks.
Government support for municipal bonds
The government expressed further, if muted, interest in Tax Increment Financing by announcing plans to allow city mayors to borrow against future Community Infrastructure Levy (CIL) receipts if the borrowing is directed towards national infrastructure projects. The Autumn Statement highlighted the possible Northern Line extension to the Underground rail network in London as one example. For background on the CIL, see PLC Property, Practice note, Planning Act 2008: Community Infrastructure Levy: an overview.
House building indemnity
The government announced a plan to provide credit support (in conjunction with house builders) for certain new build homes. House builders and the government will contribute to an indemnity fund, which will be used to pay out to a lender if a buyer defaults and there is a shortfall if the property is repossessed. House builders are expected to take the initial loss with the government paying out once the builder's part of the fund is exhausted. The government's total contingent liability under this scheme would be capped at £1 billion.
Asset Purchase Facility ceiling reduced
The government announced a reduction in the ceiling on private sector asset purchases under its Asset Purchase Facility (APF) by £40 billion to £10 billion. This adjustment (effective as of 29 November 2011) is being made following analysis of the effectiveness of private sector asset purchases. For more on the APF, see Asset purchase facility: developments tracker.
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