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.
Throughout 2020 TIF’s Energy Working Group worked on a number of submissions examining the range of problems that the UK might face in meeting the 2050 decarbonisation target, and how the transition to clean energy should be financed.
Under the chairmanship of Julia Pyke, Nuclear Development Director, EDF, the group undertook an initiative exploring the opportunities in different energy sub sectors, taking into account climate change options and the fiscal position post-virus. The group’s report ‘Investment in Energy’ was released in June 2020, suggesting that providing access to development capital through a newly formed co-investment fund or Infrastructure Development Bank would help to support projects, especially those with high development costs such as Nuclear and CCUS.
TIF welcomed Kwasi Kwarteng, Minister for CCS to a presentation in July 2020. This was very timely in the lead up to the Comprehensive Spending Review in the Autumn, where it was expected that more funds would be made available given the importance of CCS to preserving regional jobs.
In December 2020, the group met under the Chairmanship of Paul Davies, Chair, CCUS Advisory Council, to evaluate the need for the UK to implement a carbon price. The group’s report describes how a carbon price could help to deliver and fund infrastructure and in turn how infrastructure investment could lower the need for and size of a carbon price.
The Working Group's report, Social Value: Moving on From the Green Book, published in February 2020, highlights the need to provide an effective way of communicating to the public that projects are genuinely adding social value and can be seen to do so throughout the life of the asset, whilst making recommendations on how to do so. These recommendations also aim to improve the monitoring of projects timeliness and budget outcomes which is an important goal in maintaining societies support for major projects.
Government released its Procurement Green Paper in December 2020 and its proposals are intended to shape the future of public procurement in the UK for many years to come. The Infrastructure Forum’s Procurement Working Group met on Thursday 11 February 2021 to discuss a number of the consultation questions set out in the Green Paper, and submitted its response ahead of the 10 March deadline.
Under the chairmanship of Graham Wright, Tax Partner at EY, the group have been focused on identifying tax ideas and policy suggestions for the medium and longer-term to promote investment and resilience in UK infrastructure.
Throughout 2020 and into 2021, the working group have been in direct contact with tax teams at HM Treasury and have opened up an ongoing dialogue. The group have been assisting in the process of turning announced policy into detailed measures and in testing out government’s thinking. Based on these conversation’s, the group submitted its budget representation in February 2021. The establishment of structure and buildings allowances and super-deductions were proceeded by much Forum work.
Capital allowances, financing major projects, attracting investment to the UK and the developing approach towards net zero are all on the agenda going forward.
REGULATED ASSET BASE
The Infrastructure Forum has setup a Working Group charged with 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 is considering the way forward for funding and financing infrastructure projects, particularly in the context of meeting Net-Zero objectives, this is a valuable opportunity 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, submitted in January 2020. The report examined the RII model, an updated financing model that has learnt from both the failures of privatisation and PFI and the successes of TTT. The report concludes that the RII model could play an important role in delivering the next generation of infrastructure investment and is capable of delivering a new infrastructure investment revolution.
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 latest paper ‘Infrastructure Governance – The Gerrard Report’ in September 2020. The report 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.