A £500bn committed pipeline for infrastructure is great. Trouble though is, it isn’t enough. We need to find the finance.
Private finance for infrastructure is back. Or at least could soon be, based on analysis published alongside the new National Infrastructure and Construction Pipeline last week.
The pipeline identifies and details over 700 infrastructure projects and programmes with a total value of more than £500bn, of which more than £300bn will be invested by 2020/21.
It’s a massive list, and a list that the government’s Infrastructure and Projects Authority (IPA) is at pains to stress is now far more than a wish list. And it really is. It’s a serious pipeline that only includes projects that are committed, approved and have identified appropriate funding sources. So, for example, Tideway is in, but Crossrail 2 is out.
It is great to see such detailed project mapping and it shows that there are a lot of projects out there to get stuck into. But it’s also remarkable that there are many more crucial projects out there that need funding but won’t get it – even with the welcome commitment from government that it will now invest between 1 and 1.2% of GDP annually on infrastructure.
Finding a reliable – or even unreliable – estimate of the cost of delivering all the UK’s infrastructure needs to 2020 is hard. Policy Exchange had a go back in 2009, and it said £500bn needed to be spent over the decade we are now in. Others offer even higher numbers – all just going to show there are just that many projects that need doing. So it’s crucial then that some of these projects are shifted off of the government’s balance sheet and into private hands. Hence the return of PFI (or at least its modern replacement PF2).
How great it would be if, say, the Stonehenge tunnel could move to a PFI job, paid for by a toll? All that cash freed up, say, to invest in digital railways. Or any number of the projects that haven’t yet made it on to the £500bn pipeline.
The IPA right now is exploring a new pipeline of projects that would be suitable for delivery through the PF2 scheme, to be published in early 2017.
And the authority’s senior advisor Keith Waller says nothing is on or off the table right now (although he is cool on Stonehenge).
“Some things which are currently slated to be publicly financed could be PF2,” he says, pointing at the £22.5bn education programme to 2020/21 and also, closer to engineers’ hearts, major civils infrastructure such as the Lower Thames Crossing.
Waller stresses though that schemes would not be packaged up as PF2s in such a way as to woo investors, a criticism of PFI of the past. The demand is already there, he says. “So we are not doing this to give a rate of return to investors,” he stresses. “We are doing it to benefit the nation. If an opportunity to put a finance package together arises, that’s good. But not as a means to an end.”
There are other initiatives at play too. As announced in the Autumn Statement, government is continuing to support the securing of private finance through an extension of the UK Guarantees Scheme. Projects like Tideway have benefited from this and others like it, that have a strong business case but that either through their complexity or scale struggle to raise finance will now continue to benefit.
It’s a real recognition of the need to get private finance flowing.