The Government recently issued a series of policy announcements in relation to funding for infrastructure projects, likely to be of interest to those involved in major infrastructure and housing:
UK Guarantees
The Treasury has launched a new scheme, "UK Guarantees", designed to inject investment into nationally significant infrastructure projects. The principal aim of the UK Guarantees scheme, which was given statutory backing by the Infrastructure (Financial Assistance) Bill on 6 September 2012, is to progress key infrastructure projects that have been delayed by the recent economic climate and the lack of private funding. Sectors likely to benefit include transport, energy, sports, health, aerospace and utilities.
Applications for the public loan guarantees will be assessed by Infastructure UK on the understanding that the projects must be ready to begin construction within a year of a guarantee being agreed. The projects must all be financially credible and dependent on a guarantee being granted, and they should offer good value to the taxpayer.
As part of the same initiative, short term lending will be available for approximately 30 major Public Private Partnership infrastructure projects. There will also be long term loan support available for buyers of UK exports.
The Government attributes its ability to introduce the scheme at this time to its "hard-won fiscal credibility" and it plans to expedite the relevant legislation. There are hopes that numerous stalled developments will soon be revived. Critics have commented, however, that the scheme will help in the recovery of a small number of large projects, rather than a large number of small projects. They say that the Government’s listed criteria are subjective and UK Guarantees will only assist to fast track critical projects which would likely have been given funding without the scheme’s existence. Whether this is a fair analysis remains to be seen.
£2.2bn Scottish Bonds consultation
The Government has launched a consultation on extending Scottish Ministers’ powers to include bond issuance. The Scotland Act 2012 included provision for this possibility which, depending on the outcome of the consultation, could be introduced from 2015-16 as part of the Scottish Government’s full £2.2 billion borrowing limit. The consultation will assess the advantages, disadvantages, costs and potential risks of increasing devolved powers in this area. Contributions to the discussion are still being welcomed – with the consultation set to close on 14 September 2012.
Council house building boom boost for construction industry
There has been a significant rise in the number of council houses being built in Scotland, most notably in West Lothian, leading to considerable benefit for the construction sector.
According to recent official statistics, there are five times more council houses being built under the Scottish Government than under the UK Government. Last year’s figures showed 19.4 council houses per 100,000 population and 3.5 council houses per 100,000 population respectively.
In line with their drive to provide increased affordable housing throughout the country, the Scottish Government have budgeted £730 million for housing investment over the 2012-15 period. The commitment in this area is thought likely to generate substantial economic activity and support hundreds of jobs within construction.