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4 December 2014
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A maturing plan

This year’s Autumn Statement has been met with the usual industry scepticism, but may yet offer some positives. But has PF2 become the coalition’s in-joke?
‘Jam tomorrow’, ‘Much ado about nothing’, screamed some of the headlines offered by industry press releases in the hours after this year’s Autumn Statement speech by Chancellor George Osborne.

As has often been the case with government announcements under the coalition, those in the PPP and infrastructure industry felt that there were plenty of words, but little of substance in either what Osborne had to say or Chief Secretary Danny Alexander in his National Infrastructure Plan (NIP) announcement the previous day. There is a now fairly ingrained view that much of what is said is simply not translating into action on the ground, with a lack of projects being the constant refrain from investors.

In truth, though, this year’s NIP offered a lot more of opportunity than previous iterations. For a start, there was a relatively detailed section on the financing of infrastructure projects, which outlined £79bn of project finance opportunities.

A huge slice of that opportunity lies in energy – particularly the nuclear sector, where private finance is likely to meet government guarantees (or similar) to enable these huge schemes to get off the ground. Infrastructure UK has for some time been pushing the industry towards energy projects over all else, and that looks set to continue for the most part.

Interestingly, though, the NIP 2014 also includes housing for the first time – a significant breakthrough for the sector and recognition of the growing importance of housing to the country’s economic future. While the direct commissioning of new housebuilding by government may not throw up any new opportunities for private investors, there will almost certainly be other areas where it can get involved in new housing.

So while the plan is still a long way from being a pipeline in the truest sense, there is now much more visibility around what to expect in the infrastructure space over the coming years. It’s hard to disagree with Commercial Secretary to the Treasury Lord Deighton’s assessment that the NIP has “come a long way” over the past four years. Even more than that, the latest version is a big leap forward even from last year.

But there is one paragraph in the 2014 NIP that will have all those in the PPP sphere sighing. It is the one that discusses PF2. Gone are the days when PFI was mentioned in Budget documents and the like as a “small but significant part” of the government’s toolkit.

The NIP merely gives a brief outline of the Priority School Building Programme, the aggregator model and PF2 – the model that is used “primarily for social infrastructure projects and [is] where government invests equity alongside the private sector to promote closer partnership working” (in case anyone had forgotten).

There is no suggestion of new projects or pipeline coming from the model – not that anyone expected there to be.

For those in the industry who engaged with the PFI review that spawned PF2, the whole thing must sometimes feel like an elaborate Treasury in-joke, where the model was created simply to keep the industry occupied for a while.

Finally, with an election looming, the question is how much does any of this (not to mention Health Secretary Jeremy Hunt’s £1bn for the NHS estate) matter?

The answer is probably ‘more than the main parties might like us to think’. Because when it comes to infrastructure, most in all three main parties seem to get its importance. While a Labour-led government may be more inclined to focus on more social projects, it does seem that what has been set down in the NIP 2014 will most likely be continued forward whatever the political make-up of the next government.

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This year’s Autumn Statement has been met with the usual industry scepticism, but may yet offer some positives. But has PF2 become the coalition’s in-joke?

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