The Chancellor has told Treasury officials to find ways to persuade savers to transfer billions of pounds held in bank accounts, building societies and investment funds to new government "growth bonds".

The money would be invested in infrastructure projects such as toll roads, green energy and housebuilding.

Savers could be offered tax breaks, similar to those available in Individual Savings Accounts (ISAs).

1) Buy bonds to pay for a road that we will then have to pay to travel on? I'm not sure that's a brilliant sell. I thought the point of toll roads was that private industry took on the financing of such projects on the promise of long term profit due to everyone paying the tolls? If toll roads aren't profitable so private industry won't touch them, doesn't that make bonds a bad idea too? Either the bond return will be rubbish or the government will have to top up the return for an extended period, in which case it might as well just have paid for the road to be built in the first place.

Let me make a guess here. Their plan is to finance the construction using bonds financed by the general public but the maintenance and toll collection will be handed over to a private company, which will stand to make a tidy profit off the tolls while having taken on none of the risk of financing the initial build. What do you reckon the chances of that are?

2) If they're sold as being similar to ISAs, why not put your money in ISAs? No risk, known return.

Jon

A construction company may find it hard to get reasonable cost finance for say a low cost housing project but will be able to pay a good rate of return on a bond (given that borrowing money costs a lot more than the rate given to savers)

They could easily be fixed return bonds but offer a higher rate of return with the security that they are backed by the goverment (& before people say they wouldn't trust the goverment as the article says NSI have 9% of the savings market)