Rishi Sunak Draws Up Plans for New U.K. Development Bank
(Bloomberg) -- The U.K. is drawing up plans for a state development bank to help fund infrastructure projects as part of Boris Johnson’s mission to boost economically neglected regions of the country.
Chancellor of the Exchequer Rishi Sunak will unveil tens of billions of pounds of infrastructure spending next week as part of a five-year, 600-billion pound ($800 billion) plan he announced in his budget in March. On Friday night, he confirmed Bloomberg’s earlier report that the state bank will be created to accelerate investment in these projects.
“Infrastructure investment will be a key driver for the U.K. to build back better and greener from the pandemic,” the chancellor said in an emailed statement. “Through improving connections across the country to supporting innovative green technology, the new national infrastructure bank will turbo-charge investment in the projects that need it most.”
Details of the allocations and the publication of a national infrastructure strategy will come alongside the government’s spending review on Nov. 25, the Treasury said.
The proposed investment bank would use public money to leverage additional private finance for projects from roads to wind farms, helping Johnson deliver on an electoral pledge to invest 100 billion pounds in infrastructure over five years.
The Treasury said next week’s package will include:
- A plan to cut carbon through targeted investments in “transport, digital infrastructure, housing, energy”
- Revisions to the government’s so-called green book rules, which are used to assess the merits of projects, to increase the importance of regional impacts and policy goals
- Terms for a 220 million-pound “Shared Prosperity Fund” to “target funding at left-behind places and people in need, including towns, coastal communities and former industrial heartlands”
- An infrastructure strategy committing “massive” funding for programs including fiber broadband, flood defenses and transport
- A pledge for the finance ministry to set up a northern headquarters next year as part of a program to move 22,000 civil service roles out of London and the South East in 10 years
- 1.6 billion pounds to repair potholes and tackle traffic congestion in the 2021-2022 tax year
The government consulted last year on the way infrastructure is financed in the U.K., and asked respondents whether “the government should establish a new, operationally independent, U.K. infrastructure finance institution.”
The bank wil be based in the north of England, with full details published at next year’s budget. Local authorities will be able to use it for regional projects, the government said.
Officials believe state involvement will make projects less risky and lower the cost of credit for infrastructure across the country, helping stimulate investment in poorer parts of northern England where voters in December helped deliver Johnson an 80-seat majority.
“We will be bringing forward further measures to boost investment in U.K. infrastructure in due course,” Johnson said on Wednesday when asked by Tory lawmaker Gareth Davies whether he would consider setting up a national development bank to help mobilize private capital for new infrastructure.
“For decades the U.K. has suffered from underinvestment, low productivity and poor infrastructure in the regions compared to London and the South East,” Davies said Friday by phone. “As our economy recovers from coronavirus, now is the time to invest in leveling up. To help achieve this we need a national development bank capable of mobilizing private capital into critical investments.”
Davies said such a bank would also fill a hole left by the U.K.’s departure from the European Investment Bank as a result of Brexit.
Since the U.K. joined the EU in 1973, British projects have received 119 billion euros ($158 billion) in loans from the EIB, including more than 44 billion euros in the past decade, according to the bank’s data. Projects financed have included the Channel Tunnel linking Britain to France and London’s Crossrail project.
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