One thing that can be confidently said about the newly announced National Infrastructure Bank (NIB) is that it won’t be funding very much of the procurement of the UK’s national infrastructure.
The UK struggles with funding plans to finance the ambitious investments implied by government slogans like ‘build back better and greener’, with no obvious successor to the discredited Private Finance Initiative in sight (see Analysis). And there is no clear plan to make up Brexit related shortfalls in European funding.
The bank’s launch was announced by Chancellor of the Exchequer Rushi Sunak in his March Budget, to help deliver net zero and to support economic growth with £12Bn of public funding plus the ability call on another £10Bn in government guarantees. This is estimated by the Office of Budget Responsibility to equate to providing about £1.5Bn a year in investment, which would not impact on its UK economic growth forecasts.
Adverse comparisons are being made with the scale of the European Investment Bank funding that has been lost post Brexit, which was some £5 Billion. The plans are hardly transformational but the Treasury insists the bank shows the government’s commitment to levelling up and delivering world-class infrastructure to every corner of the UK.
“It will have a more targeted remit than the European Investment Bank in the UK and better focus on government priorities, including the net zero target and boosting local growth,” it says.
The Green lobby however fears that without a clear net zero mandate, the bank’s money could go to roads, coal mines or incinerators rather than green projects. Few in the construction industry would object to that.
The government’s track record with targeting investment towards green projects is not encouraging. There was previously a Green Investment Bank, launched in 2012, which was to invest public money in low carbon projects. It was scrapped in 2017 and was criticised for delivering poor value for money.
The bank’s mandate is to build back better, fairer and greener, which is being taken by most to mean supporting ideas like carbon capture and storage and climate change mitigation projects such as flood defences. At best it will provide some seedcorn investment for projects that traditional private sector lenders think are too risky, perhaps brokering deals between private and public sectors.
Details of how any of this will work are awaited. The bank’s ‘investment principles’ are to be published in the Spring, and the bank will be working out its own criteria and processes for assessing which projects to support. But no date has yet been given for legislation to give the bank a statutory basis and nothing has been announced about who will staff and lead it, but it will be based in Leeds.
Although starting from a relatively very small scale the bank must be given a chance to prove that it can attract private sector money on the scale that some might envisage. Having government money involved could often prove to be the catalysts that swings private investors towards supporting projects that their own risk profiles would shy away from.
Success of early ventures might encourage the government to increase the scale of public money available through bank supported projects. A bigger level of support initially however might have been a better idea.