The Confederation of British Industry is also recommending the creation of a UK infrastructure bank to provide funds that have hereto been provided by the European Investment Bank.
The CBI report, Financing the future: Sourcing the finance to build back better, seeks to promote the role of private finance at a time when the private finance initiative is dead and buried and the government has no money.
It insists that private sector investment “can be a major driver of the UK’s infrastructure revolution at a time when public purses have been stretched by unprecedented Covid-19 support measures”.
The CBI says that the National Infrastructure Commission (NIC) and Infrastructure & Projects Authority (IPA) need greater independence and authority to hold government to account on infrastructure delivery.
Policy director Matthew Fell said: “Prior to the outbreak of Covid-19, businesses welcomed the government’s commitment to deliver an ‘infrastructure revolution’ and interpreted it as a clear sign that the government was serious about delivering on its levelling-up agenda.
“While the UK government’s commitment to delivering infrastructure remains undeterred, the country’s fiscal position has substantially worsened. In this context, the private sector now has an even more important role to play in helping to bridge the funding gap needed to deliver the government’s vision for UK infrastructure.
“To support its ambitious infrastructure agenda and provide better connectivity, at good value for taxpayers, the government must reinvigorate the UK infrastructure market tackling concerns about regulation and a lack of clarity about investment opportunities.
“The government must commit to an approach that gives confidence to investors and capitalises on the attributes of businesses and public sector establishing itself once again as a world class destination for investment.”
The report makes 13 recommendations:
1. Government should regularly publish data highlighting the use of private finance across the UK’s infrastructure market, including information on project performance.
2. With the end of the Brexit transition period, and the likely conclusion of the UK’s access to the European Investment Bank, the government should create an infrastructure bank, which could form part of a larger investment institution to support the UK’s economic recovery.
3. The government should require the IPA to act as a conduit to coordinate the existing investor relations functions that exist in other government departments.
4. The government should give greater operational independence to the NIC and the IPA, so they are empowered to holdthe government to account on infrastructure delivery.
5. The new operationally independent IPA should drive greater alignment across government departments responsible for infrastructure delivery and provide these bodies with increased on-the-shoulder support to improve project outcomes.
6. The government should use the national infrastructure and construction pipeline to outline which infrastructure projects it is seeking private finance for, and the private finance delivery model that will be utilised in each case.
7. The government should require regulators to have specific regard to deliver the National Infrastructure Strategy, including progressing towards meeting the net zero emissions target for 2050. Each regulator must have a clear responsibility to acknowledge how regulatory policy aligns with the government’s strategic objectives on infrastructure investment, including its net-zero emissions target for 2050. This would also require each regulated sector to assist regulatory decisions and reduce fragmentation between departments and regulatory bodies.
8. The government should launch a call for evidence on the broader tools available to achieve its long-term investment ambitions.
9. Industry regulators [such as Ofwat, etc] should expand their toolkit beyond price controls. The use of price controls can lead to underinvestment given their short-term nature. Regulators must explore better complementary alternatives to deliver the transformative investment required.
10. The government should embed the principles on risk allocation in the Cabinet Office’s Outsourcing Playbook across built environment contracts.
11. Public and private sector clients should be required to make a credible and consistent assessment of balance sheet strength during the first stage of a procurement process.
12. As the government’s centre of expertise for major projects, the IPA should develop a set of principles and accompanying guidance to support all central government departments in bringing forward market-led proposals for delivering major public sector projects.
13. The government should ensure that public contracts incentivise businesses, involved in building and operating infrastructure, to meet long-term objectives, as well as short-term delivery goals.
Wessex Water director of environmental futures Guy Thompson said: “As a private company delivering essential services, Wessex Water welcomes this timely paper from the CBI. We need to invest more in essential infrastructure and to take a long-term view on that investment. The focus on a green economic recovery from the Covid crisis presents an opportunity to build infrastructure that is more resilient in the face of climate change and other environmental pressures.”
Stuart McMillan, a partner with law firm Burges Salmon, added: “Attracting private capital and funding will be crucial in delivering the UK government’s vision of an ‘infrastructure revolution’. Ensuring that the UK has a balanced regulatory environment, which offers clarity to investors, has never been more important in attracting private finance to the UK’s infrastructure market.”