Rechtsanwältin, Senior Associate
Out-Law News | 29 Nov 2011 | 5:01 pm | 2 min. read
Infrastructure law specialist Alan Aisbett of Pinsent Masons, the law firm behind Out-Law.com, said that the Government would be dependent on new models of investment to fund its spending plans.
The Government's updated National Infrastructure Plan (NIP) (178-page / 5MB PDF), issued alongside the Autumn Statement (98-page / 3MB PDF), estimates that £250bn investment in infrastructure is planned beyond 2015. The NIP identifies over 500 infrastructure projects that the Government wants to see built over the next decade. Those projects include road and railway improvements, increased airport capacity, power stations and a high-speed broadband network.
In his statement to Parliament George Osborne said that savings announced in the 2010 Spending Review would fund "pound for pound" an additional £5bn of public spending on infrastructure over the next three years, with Network Rail providing an additional £1bn. He also outlined an additional commitment to capital projects worth a further £5bn over the next Spending Review period.
The NIP outlines several options that could result in local authorities having more power to support major infrastructure, including the introduction of road tolling and allowing local borrowing against future receipts from the Community Infrastructure Levy (CIL) and tax incremental financing (TIF). It also proposes Government guarantees to support specific projects where this provides the best value for money.
Local authorities can charge CIL on new developments as a way of funding new infrastructure. TIF allows local authorities to fund projects by borrowing money against the predicted increase in locally-collected business taxes from the new development, and has already been used by the Scottish Government.
"The Chancellor said loud and clear there would be no new borrowing, so anything new by way of capital expenditure must be funded from existing resources whether revenue savings, revenue income or assets," infrastructure expert Aisbett said.
"The Chancellor and the NIP again reiterate the need for Government to use the proceeds of development as a means of funding infrastructure, particularly through the Community Infrastructure Levy and retained business rates through tax increment finance," he said.
However, he pointed out that raising funding on the back of future revenues in this way was "not without risk", and that proper risk mitigation would need to be put in place.
The NIP also sets out 40 high priority infrastructure investments. It said that the Government had "acted to resolve any barriers" to these investments, and would set out its approach to managing the projects to ensure they were delivered as effectively as possible.
Danny Alexander, Chief Secretary to the Treasury, is to chair a new Cabinet Committee tasked with delivering the 40 projects. The Government will update on its progress in delivering these before the end of 2012, it said.
Osborne also announced that the Government had signed a Memorandum of Understanding with two groups of UK pension funds to support additional investment in infrastructure, and is working to establish an Insurers' Infrastructure Investment Forum with the Association of British Insurers. The Government hopes to target up to £20bn of investment from these initiatives, he said.
However Richard Laudy of Pinsent Masons questioned how investment in infrastructure was to be made an attractive proposition for the pension funds.
"The emphasis needs to be on immediate implementation so that the new approaches to procuring a much-needed pipeline of work for the industry aren't delayed," he said.
He added that the construction risk in publicly procured projects would need to be adequately mitigated before pension funds would be willing to get involved.
Joanne Segars, chief executive of industry body the National Association of Pension Funds (NAPF) said that pension funds were "hungry" to invest in stable long-term, inflation-linked infrastructure process.
"The Government hopes to unlock £20bn, but the amount that comes from pension funds depends on the structure of the investment platform and the pricing of the assets. We are at a very early stage, and there are no plans or details on the table yet. We look forward to developing proposals with the Treasury over the coming months," she said.
Rechtsanwältin, Senior Associate