London: Use private pockets to plug £130bn funding gap for infrastructure with US-style trust

A US-style infrastructure trust, which shares investment risk between the private and public sectors, would speed up construction in London and help plug the £130bn funding gap, according to a new report.

Under the system proposed in “Burrowing for Success”, large private investors would part-fund construction projects such as new roads and buildings, and see a return on their cash through shared savings or revenue streams. Unlike PFI, the public sector would still contribute towards, own and operate the schemes.

The report’s calculations for the £750m Silvertown Tunnel show:
  – A share of future tolls would give a 10% return for private financers on an initial investment of £168m
  – Transport for London (TfL) would earn £1.7bn on an initial contribution of £581m
  – The project could be started two years earlier than expected, bringing additional revenue of £333.2m in tolls

Report author, GLA Conservative budget spokesman, Gareth Bacon, said:

“We need to keep building roads, power supplies and buildings, and get creative when it comes to finding the cash for these projects. Take the Silvertown Tunnel, which we so badly need to ease Congestion in the East of London; TfL is limited on what it can borrow by the Treasury, and with demands from Crossrail eating up its commitments, we need to find other ways to attract the investment. Under a US-style infrastructure trust, return for private investors would be 10%, far higher than government gilts. This type of package would be snapped up by pension funds and the city. Unlike PFI the risk is shared and ownership remains with public bodies.”

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In Chicago, the Infrastructure Trust was set up in 2012 under the order of Mayor Rahm Emmanuel. Its Board of Directors is made of business experts and politicians including people from the Boeing Company, Sara Lee Foods, a Trade Unionist and City Councilman. To date, one project has been identified and moved through to implementation. The project is a major $12.2m energy retrofit programme for 60 public buildings, with a share of the energy savings being split between the private sector and public sector over an 11 year period.

The report “Burrowing for Success: Financing the Silvertown Tunnel and Infrastructure US-style” is available of download at https://glaconservatives.co.uk/bfs

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