Transcript Wales Infrastructure Investment Plan

Wales Infrastructure Investment
Plan
Gerald Holtham
Adviser to Welsh government
The need for action
• UK and Welsh economies have suffered greatly
following the global economic recession in 2008-09
• In some areas Welsh infrastructure has not kept pace
with the needs of the economy yet since 2010 there has
been a 40 per cent cut in the capital budget
• Hence an urgent drive to prioritise investment in
infrastructure more effectively
• The economic benefits of investing now are particularly
strong when there are idle resources in the construction
sector and the cost of borrowing is low
Falling budgets
2,200
Welsh Government capital budget 2008-09 to 2016-17 (real terms)
2,000
Post 2014-15:
1,800
Flat real
Flat cash
1,600
Budget 2012
1,400
1,200
1,000
800
600
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
Government commitment to growth
• Over a decade the cuts would imply a shortfall of at least £4
billion on infrastructure spending in Wales
• Responding to the needs of the times, the Wales
Infrastructure Investment Plan was published on 22 May this
year.
• The plan makes clear that the Welsh Government is giving
priority to projects that support economic growth and jobs.
• Constantly developing policy – the plan is conceived as a
‘live’ document that provide clarity on future projects while
responding to changing circumstances – we do not yet know
implications of UK policy e.g. on government guarantees or
‘green’ bank
Improving planning &
prioritisation
• The infrastructure investment plan embodies a new approach where
the government:
– Maintains a detailed project pipeline for the next three years and
provides a ‘direction of travel’ for the longer-term. Pipeline to be
revised every six months - most recently on 27 November
– Welsh Gov committing to long term initiatives / schemes – LGBI
commits revenue 25yrs
– Plans to stretch the diminished capital budget through more
efficient use of existing resources and exploring and
implementing innovative finance approaches
– Introduces more rigorous ‘business-case’ requirements and state
of the art project appraisal techniques to optimise public value
for money
Boosting Resources
• Wales has made sparing use of PFI and has servicing
obligations of scarcely £100 million a year – about 0.7 per cent
of the annual budget, much less than the UK and Scottish
governments
• The Silk Commission has recently recommended additional tax
and borrowing powers for Wales to be progressively introduced
up to 2020
• Even without additional revenue sources there is room for a
prudent increase in leverage
• Welsh government is investigating alternative ways to raise
additional finance
What is already happening
• Switching revenue to capital
• Developing new financial initiatives
– roads
– Schools
• New mechanism for funding social housing
• Waste treatment and disposal
• An extra £1bn by 2020 – although this is just a small
part of investment Welsh Infrastructure requires.
Innovative Finance
• Local Government Borrowing Initiative –collaboration
with Local Government - £170m to improve local
highways across Wales
• Ely Bridge development in Cardiff, working with the
Principality Building Society to unlock capital funding and
provide 700 housing units for rent, social rent and open
market sales
• a new mechanism for delivering affordable homes,
working with registered social landlords, committing £4m
a year for thirty years to support investment of over
£100m during the next two to three years, which will
finance delivery of more than 1,000 affordable homes
• Stop press (announced 5th Dec) – A465. New PPP
scheme £300m NPD – Start procurment 2013 – build
2016
More innovative finance
• Among methods currently being appraised is a
variant of the no-profit-distribution model of PFI
developed in Scotland
• WG is also consulting with legal and financial
experts on alternative vehicles for borrowing for
infrastructure
• The aim is methods that are cost effective, keep
debt off the public balance sheet and fully comply
with EU regulations on procurement and state aid
Looking ahead
•
This is just the start of the process – Wales will be continually seeking new
ways improve delivery and find innovative mechanisms to attract private
sector investment into public infrastructure
•
Open door to all those wishing to develop investment opportunities
•
Wales has infrastructure investment needs and opportunities across social
infrastructure sectors such as housing and school & opportunities to
develop more traditionally defined infrastructure provisions such as
– significant energy production potential still untapped, including green options
such as the ability to help facilitate the construction of a proposed Severn
Barrage
– the potential to further develop airport facilities to service Wales and the wider
United Kingdom
For further information please contact the
Welsh Government Strategic Investment
Division via –
[email protected]