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Government must do more to encourage private sector investment in infrastructure projects in absence of public money, says expert

The Government must do more to encourage private sector investment in major infrastructure projects if it will not spend public money on those projects itself, experts have said.16 Nov 2012

Infrastructure law specialists Graham Robinson and Jon Hart of Pinsent Masons, the law firm behind, called on the Government to come up with "workable policies that encourage private sector investment" in infrastructure in order to help stimulate growth in jobs and the economy. The experts were reacting to comments made to the press by John Cridland, the head of business lobby group the Confederation of British Industry (CBI).

Cridland called on the Government to spend £1.5 billion of public money on major infrastructure projects including a new sewerage system in London, a new nuclear power station and a rail hub in the north of the country, according to reports by the Guardian and Daily Telegraph.

The money could also be spent on road repairs, freezing business rates for retailers and improving investment allowance tax breaks for smaller businesses, Cridland suggested.

Robinson and Hart said that now, more than ever, it was important for Government to be pushing forward new approaches to major infrastructure investment. While austerity means that Government money may not be available, it is essential that the policy framework for looking at radical approaches to funding is considered, they said.

First and foremost would be a reappraisal of the way in which investments were being made in respect of the motorway and strategic roads network, they said.

"Existing reviews suggest that a privatisation of the road network, or a similar model, could generate at least £100 billion, and there are pre-existing legal structures which could be developed to make this possible," Robinson said.

"Privatisation of the roads could be introduced under an adapted form of the Regulated Asset Base (RAB) model, currently in use by in the utilities sector but where the Government appoints an independent regulator to protect consumers, in this case road-users, and to drive the correct behaviours of private sector operators, whilst providing for greater certainty over the returns they can generate from their investments," he added.

"The RAB model has been shown to work, but it is going to require a significant degree of political commitment, in terms of putting across the benefits to be received by motorists and the broader economic benefits to be derived," Hart said. "In terms of convincing motorists, the Government may, for example consider changing the vehicle licence and fuel duties in order to reduce those motoring costs to drivers and make road tolls more palatable."