Government consultation papers usually seek to solicit views on policy proposals. However this one is more of a cry for help. The 44-page Infrastructure Finance Review: consultation is long on questions, short on ideas.
The Treasury knows that the private finance initiative (PFI) has finally been exposed as bogus accounting and the UK’s access to the European Investment Bank is expected to end if and when the UK leaves the European Union. But it does not seem to know how to replace them.
In a foreword to the consultation paper, exchequer secretary to the Treasury Robert Jenrick writes: “As we leave the European Union, our relationship with the European Investment Bank will change, and while we will explore the options for a future relationship with the EIB, we must and will be prepared for all scenarios. I am therefore pleased to be launching this open consultation process. Over the course of this review we will consider the infrastructure finance market, analyse future challenges, and look at the future role of the government in ensuring that viable projects can raise the private investment they need.”
The government announced last year that it would no longer use PFI and PF2 models for new projects. In one of the most significant passages of the paper, it states: “Government will not be seeking a like-for-like replacement for these models. The government is open to exploring new ways to use private finance in government projects, but the benefits brought by private finance must outweigh the additional cost to the taxpayer of using private capital, and the government will not consider proposals demonstrating the same characteristics as PFI or PF2.”
So no PF3 then.
The consultation seeks views instead on whether the regulated asset base model used in the water and energy sector and/or the contracts for difference auctions in renewable energy could be applied to other infrastructure types.
To support the work of the review, the government plans to appoint an expert panel to provide advice during the review process and input on the challenges facing the infrastructure market and how they can be addressed. The panel will also help to facilitate high quality industry engagement throughout the review process, and provide feedback on the results of the public consultation. The members of the expert panel will be announced shortly, and will comprise experts from the infrastructure and finance sectors.
The full list of questions asked in this consultation is:
1. Do you agree with strengths identified of the UK infrastructure finance market?
2. What are the weaknesses in the infrastructure finance market?
3. What is your assessment of the European Investment Bank’s role in addressing market failure? Where has the EIB provided additionality?
4. To what extent can the private sector fill any gap in infrastructure finance left when the UK leaves the EIB?
5. What new types of assets or technologies do you see coming to market in the next few years and what kind of financing issues might they raise?
6. Does the market have capacity on a long-term basis to finance very large projects?
7. What is your assessment of the vulnerability of infrastructure finance to a downturn in market conditions?
8. In the long-term, what lessons or models from established tools could be applied to different contexts?
9. In what new ways could private finance be used to improve the delivery, management and performance of government-funded infrastructure projects?
10. What is your view on the effectiveness of the existing government tools to support the supply of infrastructure finance?
11. Should the government change, expand or reduce the levers it uses to support the supply of infrastructure finance?
12. Should the government consider any alternative forms of finance support for sectors such as higher education or housing associations?
13. Which sectors or types of infrastructure may need support from government to raise the finance they need, particularly in light of major technological changes?
14. In your view, how effective is the current institutional framework at ensuring good projects can raise the finance they need?
15. Is any reform to the UK’s institutional framework needed to better provide support to the market?
16. In the event that the UK loses access to the EIB, do you agree with the NIC that the government should establish a new, operationally independent, UK infrastructure finance institution? If so, what should its mandate be, and how should its governance be structured?
The consultation closes on 5th June 2019. Further details are at: www.gov.uk/government/consultations/infrastructure-finance-review