Social Market Foundation: UK needs its own investment bank

Government should act now to reform public investment in infrastructure and make it easier for pension funds to invest, says the Social Market Foundation.

The SMF says to offer short-term economic stimulus, investment should focus on projects that can be delivered quickly and are labour-intensive, such as home insulation programmes and clean energy projects that support domestic supply chains.

The group wants new funding models for private investors, but says government should be ready to use public money to provide development capital for innovative infrastructure projects which look to utilise new technologies. This should be administered by a new UK institution to replace the European Investment Bank – a recommended from the House of Lords European Union Committee. The UK should seek to establish a robust “project bond” market, including  an insurance market for project bonds.

SMF says urgent pension reforms should be undertaken to give Britain fewer and larger pension funds with the scale required to make major infrastructure investments (note that an initiative to combine nearly 100 local authority funds into a ‘superfunds’ was set in motion by George Osborne as chancellor of the exchequer in 2015). SMF says pension scheme charging rules should be reformed to allow funds of sufficient size to pay management fees for infrastructure investments.

To deliver the policy the group wants an urgent review of planning regulations.

The organisation says ministers should make the public case for the local benefit of infrastructure to reduce investor risk – and  explain why private profit from public infrastructure is not a flaw of policy but a necessary condition of investment .

Read the report in full

Further reading

Pensions trustees face new requirement: invest with climate change risk in mind

National infrastructure: will our pension funds invest? The view from PIP’s Mike Weston

Government aims to help drive pension funds towards green investment

Treasury Committee opens inquiry on decarbonisation and green finance

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