Government "not moving fast enough" on infrastructure finance, says expert

Infrastructure expert Fraser McMillan of Pinsent Masons, the law firm behind Out-Law.com, was responding to George Osborne's Autumn Statement (93-page / 2.8MB PDF) announcement that the money would be redirected into infrastructure spending from Whitehall efficiency savings. He pointed out that only £750 million of a £5bn fund announced by the Chancellor at the same time last year had actually been spent to date.

"It is simply not clear that the money earmarked for infrastructure investment will make its way into the real economy quickly enough to have the intended impact, and [PFI replacement] PF2 will not take effect quickly enough to serve as a stimulus," he said. "Where private investment is needed the problem is not one of knowing what infrastructure needs investment, or even an absence of willing funders to make it happen, but of making those projects genuinely investable. It is by no means clear that anything in today's statement will address that."

He pointed out that some of the "landmark" projects referred to by the Chancellor during his speech, including the extension of the London Underground's Northern Line to Battersea, had been part of the Government's National Infrastructure Plan "for some time".

"Many of these projects have long lead-in times, and of the £5bn promised for projects in the last Statement, only £750m has actually been spent," he said. "That means money is not making its way into the real economy fact enough, hitting the construction industry in particular - with a consequent impact on GDP."

Commitments made by the Chancellor included an extra £1bn to roads, including four major new schemes, £270m to fund improvements in further education colleges and £1bn for schools, to include the building of 100 new free schools and academies. The Government will also fund ultrafast broadband in 12 additional cities, and has set aside an additional £600m for scientific research infrastructure.

Finance for the extension of the Northern Line to the former Battersea Power Station, which is being turned into an £8bn commercial and residential development site, will benefit from the Government's new UK Guarantees scheme for nationally significant infrastructure projects. The Chancellor announced that projects worth £10bn had already pre-qualified for the scheme, under which major projects which are struggling to obtain funding will be able to take advantage of the Government's "hard-won fiscal credibility" to obtain access to finance.

According to the statement, the Pension Investment Platform (PIP) will be ready to begin making investments in infrastructure projects in the first half of next year. The Government signed a memorandum of understanding with the National Association of Pension Funds (NAPF) and Pension Protection Fund (PPF) to create the PIP last year and the industry bodies have since announced that seven major UK pension funds have signed up as founding investors.

However, McMillan said that the lack of detail on the independent platform was concerning.

"News of the PIP being brought forward is welcomed, but the lack of detail around the amount available for investment is cause for concern," he said. "£20bn was the target, and at last count less than £1bn has been raised. The absence of any positive news there may raise a few eyebrows."