Engineering experts have urged the Chancellor to use the Budget as an opportunity to firm up its commitment to establishing a Green Investment Bank and give some reassurance that it will be ambitious enough to attract the huge scale of investment needed in the UK's infrastructure networks.
In its Budget submission, the Institution of Civil Engineers (ICE) acknowledges that the constraints on Government spending limit the scope for infrastructure investment, but says the creation of an ambitious and well thought out infrastructure bank - through attracting large volumes of private investment - could ensure vital projects continue to get built despite difficult financial times.
Government body Infrastructure UK has estimated the UK will need to invest £40-50bn per annum in infrastructure to secure the UK's future economic competitiveness and aid the shift to a low carbon society. ICE's State of the Nation - Infrastructure 2010 report published last week* also found existing UK infrastructure to be in poor condition. The outgoing Labour Government had committed to a Green Investment Bank with a start up fund of only £2bn - such a bank also formed part of the new coalition Government's agreement, but its remit and operation are yet to be decided.
ICE, which has been calling for an infrastructure funding mechanism for some time in the form of a National Infrastructure Investment Bank, is currently working with the Green Alliance and others to develop detailed proposals on how a Green Investment Bank could work.
ICE Director General, Tom Foulkes, said: "The commitment to establishing a Green Investment Bank was a good start, and we know Infrastructure UK is working hard to flesh out its plans, but we urge them to consider the scale of the task at hand and ensure the bank is sufficiently robust and ambitious.
"For such a bank to succeed it must be a strategic, permanent institution which depoliticises some investment choices and helps to create a stable environment for private investors. It would also provide a 'think tank' function for developing new innovative ways of financing UK infrastructure. We hope our work with the Green Alliance will aid Government's thinking on this."
But ICE stresses that a planning regime, delivering fast and predictable decisions on major infrastructure projects will also play a key part in luring private investment, by reducing the perception of private investors that infrastructure projects carry a high degree of political risk. They also believe Infrastructure UK, with its remit to establish a 5-50 year strategic framework for infrastructure, has a crucial role in providing a lower risk investment environment.
Foulkes added: "Lengthy, expensive planning processes - such as the seven years it took to reach a decision on Heathrow Terminal 5 - add unnecessary risk and costs to projects. Funding and planning work hand-in-hand, the Government must ensure reforms to the planning regime have the right focus and help to create the right environment to attract investors.
"The new Government must also recognise the value of Infrastructure UK and ensure it is adequately resourced to deliver its role and improve the processes for the strategic planning, prioritisation and coordination of UK infrastructure development."