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Autumn Statement 2016 | Detail of bonds is key


The structure of any infrastructure bonds scheme is key to its success, according to KMPG UK sector head for infrastructure Richard Threlfall.

The Treasury is reported to have been discussing plans to issue infrastructure bonds to private investors, according to the Financial Times. The bonds would help fund infrastructure investment, which it said is central to the upcoming Autumn Statement.

If this plan is announced in tomorrow’s (23 November) Autumn Statement, Threlfall said the key is in its delivery and seeing whether they are just essentially government gilts in a different guise – where the government pays the gilt holder a fixed cash payment every six months until the maturity date, at which point the holder gets the original sum back.

“I think the chancellor has been clear he wants to prioritise more infrastructure spending, I think it’s one of the best ways of trying to protect the economy in the short term from the economic fallout of the Brexit vote,” said Threlfall.

However, on bonds he said: “I wouldn’t be at all surprised if the announcement didn’t include some reference to raising additional money for infrastructure through infrastructure bonds, but the real question will be ‘are they raising additional money, or are they making an assertion on money borrowed from gilts that will be invested in infrastructure?’”

Threlfall also added a note of caution on any new announcements, such as the £1.3bn announced to ease congestion on roads.

“Where, based on previous experience, I think we’ll all be high alert is to try and separate the real additional money from the re-badging and re-packaging of money that would be spent anyway. The other significant issue is money going in but not going in for another five or 10 years,” he said.

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