Let QE fund a new infrastructure bank
The Government should use some of the money created from quantitative easing to create and part fund a 30bn National Infrastructure Bank, a new report suggests today.
Author: Alistair Osborne, the Telegraph |
The study from local government think tank Localis and Lloyds Banking Group makes the new bank a key recommendation among proposals to kickstart the Coalition’s planned 250bn of infrastructure spending over the next five years.
Such investment, which is expected to feature strongly in this month’s Budget, is a major plank of the Government’s growth strategy.
The study argues that the new bank would “lend to the private and public sectors to fund the construction of new infrastructure”, invest directly in projects and “using the Green Investment Bank model, guarantee other banks’ loans to fund infrastructure”.
It envisages the Government providing the first 8bn of start-up capital, buying bonds issued by the new bank, funded by either QE or wealth taxes, such as a mansion tax. A further 4bn would come from local government pension schemes.
A further 18bn would be raised over four years from UK pension funds, which manage almost 2 trillion of assets, only 1pc of which is currently directed to infrastructure investment. Local government schemes would buy 2bn of the bank’s bonds a year, with private pension funds encouraged to invest 2.5bn annually in the bank.
The Coalition sees unlocking pension fund investment as a key component of its plan to revamp Britain’s creaking infrastructure, while it seeks a replacement for politically out-of-favour private finance initiative schemes.
The report also envisages increased roles for local authority funding in boosting infrastructure spending, include Tax Increment Financing ? where councils borrow against a future uplift in business rates ? and the possible auction of enterprise zones to the private sector. Alex Thomson, chief executive of Localis, said: “We need to get Britain’s economy growing again. We believe that a bottom-up approach is the best way of catalysing such growth.”
The CBI business lobby also calls today for the Government to “fine-tune” the planning system for major infrastructure to “reduce uncertainty at the pre-application stage, simplify the non-planning consent landscape, and introduce more flexibility and a sense of urgency into the system”. It said there are currently 52 major proposed projects in the pipeline, including wind farms, nuclear power stations and key transport upgrades, which have not even reached application stage.
Dr Neil Bentley, CBI deputy director-general, said: “Too many applications are still at the initial stages at a time when we need major investment in our infrastructure.”