The implementation of US President Donald Trump’s trillion-dollar infrastructure plan is beset by regulatory hurdles, Hari Chandra, head of power at investment firm Jefferies, told delegates at Infrastructure Investor’s Debt and Project Finance Forum in Berlin.
Zooming in on the forces driving infrastructure finance, Chandra said the way the US legislative system is currently designed means the ability of any federal government to dictate policy changes is “not that high”. The country’s entrenched system of checks and balances, even at the state level, implies the ability of “putting in an Australian-style or Trump-led infra plan in any meaningful way is shocking,” he said.
“But you never know, Trump’s the president,” Chandra quipped. He added that as a result of short-term political cycles, especially in the US, where mid-term elections are held, there remains a “massive disconnect” between electoral promises and the reality of infrastructure investment. He called for less reliance from the industry on government support.
In contrast, in the UK, the Fixed Terms Act that sealed the Conservative-Liberal Democrat governing deal in 2010 has been a “game-changer”, according to Alasdair Grainger, head of commercial and corporate finance at the UK’s Department for Business, Energy and Industrial Strategy. He said ministers are now beginning to think longer-term, with the establishment of the National Infrastructure Commission an example of this.
However, he said the aftermath of the Levy Control Framework, the UK’s support system for renewable technologies which recorded an overspend of over 20 percent on its £7.6 billion ($9.5 billion; €8.8 billion) budget, has “left a scar on politicians’ minds”, although he conceded that the government still has a significant role to play in helping with funding.
“Someone has to pay and [politicians] have to be honest with the public about the costs, an important conversation which the UK lags behind,” Grainger explained. “There’s a desire for private sector capital to be provided but there’s an understanding there needs to be a government structure. Ministers now need to be more proactive than perhaps 10 years ago.”
Yet if political risk is currently making headlines, argued Tim Cable, executive director of infrastructure debt at Hastings, it is not due to its changing nature – rather, it is because it is crystallising only now.
“For our sector, populism is not a bad thing,” he said, citing the large promises of investment made, although he called for a greater use of public funding.
“Some EU funding goes to UK OFTOs,” he stated. “Is there a shortage of liquidity there? No. There’s a need to spend precious funding wisely and a need to focus on sectors where private capital is strained.”
Grainger concluded by expressing hope the UK government can retain its status as a beneficiary of European Investment Bank funding, although he conceded it will be a small item in the looming Brexit negotiations.