UK ‘green’ fund gets go-ahead in Budget

The government said demand for investment in economic infrastructure in the UK is expected to be in the range of £40 billion (€45 billion; $60 billion) to £50 billion a year until 2030, and possibly beyond. This is “significantly” above historic levels of £30 billion. 

Infrastructure UK has been instructed to develop a national framework and publish it by the end of this year, the Treasury said. A separate action plan that takes in the views of the industry, regulators, government departments, and the Centre for the Protection of National Infrastructure is slated to come out in a year’s time.

The framework will set out the role that the UK’s infrastructure should develop and sustain over the next 50 years. It will also examine “the priority policy interventions” for government to help develop an investment portfolio that involves the public and private sectors.

The high cost of UK civil engineering work for major projects is also to be probed, the government said, adding that there was evidence it was expensive when compared with other developed nations.

The new ‘green’ investment bank’s mandate will be to invest in the low-carbon sector, specifically looking at new energy and transport projects “where there is a significant risk of a gap emerging in the provision of equity capital to large, complex low-carbon infrastructure projects in the next few years”, the Treasury said.

Half of its equity will come from the sale of the high-speed rail link between the Channel Tunnel and London’s St Pancras station – known as High Speed 1 – and other asset sales, with the rest matched by private investors, Darling told Parliament in his last Budget ahead of the general election, expected on May 6th.

“This equity will unlock billions more of finance from the private sector,” Darling said.

A Treasury spokesman, who did not wish to be named, told Infrastructure Investor that the fund should be “set up and running during 2011”.

“The billions and billions he (Darling) is referring to are the private sector investment in say power generation or wind generation, which we think will be catalysed by this. So it’s actually principally coming from power generation firms themselves,” he said.

“As a result of this kick-start pump-priming funding we think we will be able to lever this in more successfully and that reflects the fact that if you look at something like power, there are risks associated with wind power development in the future that aren’t necessarily there with the more traditional  power sources.”

“It’s the classic argument for why government might have a catalyst role.”

Dovetailing with the bank initiative is a £60 million cash injection to develop the UK’s ports to support offshore wind turbine manufacturers looking to relocate facilities.

“This will help the UK secure new inward investment deals and support thousands of extra jobs in these sectors,” Darling said.

Other budgetary infrastructure measures included an extra £100 million of central government cash to repair local roads damaged badly by the January freeze, while motorways and other major roads get £285 million, partly funded by cuts in the Department for Transport’s marketing and communications budgets.