Wales Infrastructure Investment Plan

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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

2,200

Falling budgets

Welsh Government capital budget 2008-09 to 2016-17 (real terms)

2,000

1,800

1,600

1,400

Post 2014-15:

Flat real

Flat cash

Budget 2012

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 5 th

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]

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