THE MEETING PLACE FOR INFRASTRUCTURE
One of the most effective means by which The Infrastructure Forum develops constructive ideas for the future of the sector is through its Working Groups.
These have been established in several policy areas, chaired by authoritative figures in the sector, allowing participants in the Forum to put forward constructive ideas and proposals on a range of detailed issues important to the health of infrastructure in the UK.
The Government announced its intention to modify insurance Solvency rules under Solvency II with a view to facilitating greater investment by insurance companies and pension funds in major infrastructure projects. Striking the right balance between prudent capital requirements and facilitating greater institutional investment in infrastructure projects will require considerable expertise and TIF is delighted that Charlotte Clarke, Director of Regulation and the ABI has agreed to lead a TIF work stream in this area alongside Michael Gerrard of INPP, whose experiences in infrastructure investment and at Tideway make him uniquely qualified to advise in this area.
The Forum's working group has now submitted its response, which states that as presented, the reforms would not incentivise an increased flow of long-term capital from insurance companies into the infrastructure sector, particularly in relation to the way that the matching adjustment is proposed to be reduced for assets with a wider premium for illiquidity.
TIF’s Energy Working Group has worked on a number of submissions in the last 18 months examining options for the UK to meet the 2050 decarbonisation target, and how the transition to clean energy should be financed. The group published reports including Investment in Energy, Carbon Capture & Storage: A Necessity not an Option, and Carbon Pricing & Infrastructure Investment.
Forum supporters recently had the opportunity to meet Alex Milward, Director Carbon Capture Utilisation & Storage at BEIS. The meeting allowed supporters to explore key current energy policy issues and be briefed on emerging government policies following recent dramatic changes in energy markets. The discussions also focused on the particular opportunities presented by Carbon Capture & Storage initiatives and progress in this area.
The Infrastructure Forum has been active in promoting the use of regulated asset base financing in major infrastructure projects like new nuclear. As our work has shown it can bring together debt finance, private equity, public infrastructure bank engagement and government guarantees, in a regulated model which guarantees to investors that future energy customers will pay them a fair price in return for their finance. TIF is therefore proposing to hold a special round table in Westminster in September 2022 which will bring together Sizewell’s leaders with Government, regulators, investors and professional advisers for a Chatham House rule discussion on the key issues in Sizewell C’s rollout. The special roundtable will offer an opportunity for sovereign wealth funds, pension funds, potential investors and professional advisors and energy experts to examine how the Sizewell C model is developing. It will also be possible to look at how the Sizewell model can inform the design of Great British Nuclear and the government's ambitious plans to roll out up to 8 new nuclear power stations in coming years. It is anticipated that the work of the roundtable if successful will be followed by a series of working group activities and reports from The Infrastructure Forum.
Following the Cabinet Office response to its green paper consultation, the Procurement Working Group were very pleased to be joined by Lindsay Maguire, Head of Engagement, Procurement Reform and Lucy Sydney, Head of Strategic Relationships, Procurement Reform at the Cabinet Office on Tuesday 1 February 2022, who briefed the group on the key points and themes raised in the Government's response and highlighted the next steps for procurement reform. On Tuesday 31 May 2022, the group met with the team at the Cabinet Office responsible for the Construction Playbook to discuss topics including Modern Methods of Construction (MMC), Net Zero Carbon buildings and how the playbook will be refreshed.
The group last met on Tuesday 12 July 2022, where we explored commercial capability, including the need for further collaboration and upskilling. A second key area was how to connect up departments, in particular the IPA & Cabinet Office, as the current approach felt rather siloed. Also forming a part of the discussions was how digitalisation can improve procurement practice and promoting the uptake of new and innovative technologies within procuring authorities.
Under the chairmanship of Graham Wright, Tax Partner at EY, the Taxation Working Group has been focused on identifying tax ideas and policy suggestions for the medium and longer term to promote investment and resilience in UK infrastructure. The group’s latest report, 'Super-Charging the Super-Deduction' includes a contribution from each of the Big 4. The report suggests that HM Treasury should consider a range of options, including an extension of the super-deduction, to relieve remaining concerns and increase the overall benefit of the initiative.
At Spring Statement, the government acknowledged that the generosity of the permanent system of capital allowances compares unfavourably to international peers and wanted to know what more the capital allowances regime could do to support business investment. The Infrastructure Forum Taxation Working Group has therefore taken the opportunity to provide some suggestions for adapting the capital allowance regime, recently submitting our response to Governments consultation on the subject.
The Ministry of Housing, Communities & Local Government recently consulted on the National Infrastructure Planning Reform Programme. TIF have long been closely engaged in the debates on planning reform with particular regard to incentives to encourage development including the operation of Section 106 scheme and the Community infrastructure Levy.
We therefore decided to set up a Planning Working Group, chaired by James Good of Bryan Cave Leighton Paisner, tasked with providing a response to MHCLG’s consultation. The group’s response to the consultation and detailed recommendations have been submitted and the Forum will develop its work on infrastructure planning in the light of the government’s response.
REGULATED ASSET BASE
The Infrastructure Forum's RAB Working Group has long been analysing the potential benefits behind an innovative expansion of RAB based financing models. Mike Gerrard, Chair of INPP and formerly of Thames Tideway, chairs the RAB Working Group comprised of infrastructure finance experts.
As the whole of government considered the way forward for funding and financing infrastructure projects, particularly in the context of meeting Net-Zero objectives, the group were able to influence government thinking on structuring the RAB model to deliver infrastructure projects cost effectively.
The RAB Working Group set out its ideas for an innovative expansion of the RAB model in latest report, Regulated Infrastructure Investment.
It was very pleasing that Government announced in October 2021 a new finance model for nuclear projects, designed to encourage a wider range of private investment using the regulated asset base model.
Following the great success of the work he led on Regulated Infrastructure Investment, Mike Gerrard is leading another strand of work on infrastructure governance. The governance of listed businesses has benefited from a succession of reviews and published codes of best practice over the last 30 years. By contrast and despite the scale of many infrastructure projects and businesses being at least equivalent to that of FTSE250 companies, governance of the development, construction, operation and maintenance of infrastructure assets has not benefited from reviews, nor published codes of best practice.
The working group published its paper ‘Infrastructure Governance – The Gerrard Report’, which provides a set of recommendations for boards across the infrastructure sector, regardless of whether their organisations are public or private sector, or whether they manage assets in the operation or construction phases, or in early-stage development.