Slaughter and May is advising the Treasury on the first set of investments made as part of the Government's Business Finance Partnership venture, announced yesterday (5 December) in Chancellor of the Exchequer George Osborne's Autumn Statement.

The Government will invest £600m in the venture, which is intended to increase the supply of capital through non-bank lending channels, with fund managers Alcentra Limited, Haymarket Financial, M&G Investment Management and Pricoa Capital to raise a further £650m. An additional £100m is expected to be invested with a fifth fund manager.

The Slaughters team is being led by corporate partners Charles Randell, Robin Ogle and Paul Dickson, alongside tax partner Graham Iversen and financial regulation partner Jan Putnis.

Ashurst is advising Alcentra led by investment funds partner Piers Warburton, Hogan Lovells is advising M&G led by funds partner Nicholas Holman, Macfarlanes is acting for Haymarket Financial with financial services partner Alex Amos, while Pricoa is using its own in-house counsel.

The Treasury announced yesterday that these funds, which will lend to mid-sized companies, are now open to business.

Dickson said: "There are limited options in the way of debt funds for small and medium sized businesses in the UK so this is relatively innovative and a fairly big commitment to lending in this way. Hopefully this will stimulate non-bank lending more generally, showing that it is possible to raise large funds for investment in this area."

The move was announced as part of a £21bn programme of credit easing measures included in the Government's 2011 Autumn Statement to support smaller and mid-sized businesses that do not have ready access to capital markets.

The Government put out a request for proposals from fund managers in May this year to submit their applications to be involved. Slaughters was first instructed to advise the Treasury on the project in the spring.

In his statement yesterday, Osborne also announced that he is hoping to raise £1bn by cutting the annual tax free limit on pensions contributions from £50,000 to £40,000, and reducing the lifetime allowance from £1.5m to £1.25m, with pensions held by high net worth individuals such as lawyers set to be affected.

The Chancellor said the cut would affect only the highest earners paying into a pension scheme, with 99% of people paying less than the £40,000 a year towards a pension.

Ashurst pensions partner Steven Hull commented: "The irony, of course, is that these changes are likely to adversely affect more and more people at income levels that would not be classed as naturally among the so-called 'rich', all of whom who are trying their best to save for their retirement."

"The further reduction in annual and lifetime allowances continues to punish those prudent enough to plan for their futures," added SNR Denton pensions partner Jay Doraisamy.

The reduction in the tax free limit had been widely touted prior to Osborne's announcement, though the drop had been anticipated to be larger.

"The only slight surprise is that the Chancellor has not reduced either allowance by as much as first feared, leaving scope for further changes next year if thought necessary," said Hull.

bliss-nicholasMarket reaction to the Autumn Statement

On the reform of PFI as PF2:

"I welcome PF2. After a period of two years where there has been no clarity on approach to investment in social infrastructure – save that it was clear that PFI was 'discredited' – the rules have now been set and, I sincerely hope, the delivery of infrastructure can be removed from the political arena and implemented.

"Whether you liked it or loathed it, PFI was a well understood model that certainly delivered much needed infrastructure assets. Many would argue that delivery was achieved at a cost that was too high and through a structure that was too opaque and inflexible for the public sector. In the words of the Chancellor, it had become the 'discredited PFI'. The model had to change to survive and to command public and political support."
Nick Bliss, infrastructure finance partner, Freshfields Bruckhaus Deringer

"Despite the Chancellor claiming that the so-called 'discredited PFI' will be replaced, in reality, it will be replaced with the new PF2. However, the devil is most definitely in the detail. Given the significant amount of guidance released today, it will take some time for the market to form a considered view on the reforms being proposed.

"These are some of the most significant reforms we have seen since the introduction of standardisation and, if they work, should revitalise a market looking for a sensible and deliverable pipeline of projects."
Cameron Smith, energy, transport and infrastructure partner, Ashurst

"The coalition Government is often accused of going too far too fast, but in this case it is not moving fast enough. It is simply not clear that the money earmarked for infrastructure investment will make its way into the real economy quickly enough to have the intended impact, and PF2 will not take effect quickly enough to serve as a stimulus.

"The noises from the Treasury on infrastructure spending are more positive than they have been in the past couple of years but they lack the wow factor."
Fraser McMillan, infrastructure partner, Pinsent Masons

louisa-cilenti"So rather than kill the goose that lays the golden egg by capping equity profits or sharing in sale gains the Government says: if you can't beat 'em, join 'em. It's questionable whether direct public sector investment alongside the private sector will deliver better long-term value for money for the taxpayer or more affordable deals for local authorities if the investment is made at a 'market rate' (which will simply match the private sector's return) which will be more expensive than debt or Local Authority capital contributions.

"With rewards come significant risks as an investor. In today's funding market where long-term debt has almost dried up it is optimistic to think there are enough alternative sources of finance to take up the slack, avoiding mini-perm structures which would expose the public sector to refinancing risk by the back door. There are other difficult risk areas that Government may not be comfortable accepting such as planning risk, demand risk and market risks on certain complex deals like waste."
Louisa Cilenti, projects partner, Nabarro

On changes to tax relief on pension contributions:

"Pensions are a very efficient and much needed way of ensuring people can enjoy retirement comfortably. If the current Annual Allowance is reduced, it's not simply a matter of taking that money and investing it elsewhere – substantial extra amounts are needed because of the less favourable tax treatment received by other savings methods. Overall, reducing the pension Annual Allowance further will affect many more people than the hotly debated 'mansion tax' and further erodes the ability of successful people who have worked hard, to invest so they can also enjoy their retirement."
Roy Davidson, pension specialist, Dickinson Dees

"It is good news that the Pensions Regulator's statutory objectives may be expanded to include a specific objective to consider the affordability of deficit recovery plans. It is equally good news that the DWP is to consult on the smoothing of asset and liability values. This would recognise that private sector final salary pensions are only affordable at all if the impact on the sponsoring employer is part of the equation."
Jane Marshall, pensions partner, Macfarlanes

On tax changes:

"It is no surprise that tackling tax avoidance was at the forefront of the Chancellor's tax measures. We know a General Anti Abuse Rule will be introduced in April 2013 but as an hors d'oeuvre he moved today to shut down with immediate effect a number of corporate tax mismatch schemes."
Richard Palmer, tax partner, Ashurst

"The area of today's Autumn Statement that may lead to the most work for lawyers is the additional resourcing for HMRC to resolve longstanding disputes. With additional resourcing, ongoing tax disputes are likely to be dealt with more quickly. Therefore those taxpayers that have had cases going on for a number of years may benefit from independent advice on whether in the current judicial climate those cases are likely to succeed, even if their current advisers (who may have marketed the scheme to the taxpayers in the first place) think they may be successful or are suggesting taxpayers settle when in fact they have a good chance of success."
Gary Richards, corporate tax partner, Berwin Leighton Paisner