Treasury agrees first UK Guarantee scheme 'in principle'

The Treasury has reached “agreement in principle” for the first project to receive a UK Guarantee, with an average of seven schemes coming forward on a daily basis, CN can reveal.

UK Guarantees cannot be completed until the legislation has been approved by Parliament, but Infrastructure UK chief executive Geoffrey Spence told CN that agreement had been found “in principle” on the first scheme.

Mr Spence would not say which scheme had been successful in reaching the initial agreement, but said it was not the £600 million Mersey Gateway Scheme, which has been announced as one of those in talks over a UK Guarantee agreement.

The Treasury has proposed setting aside £40 billion to underwrite infrastructure projects under the scheme.

Mr Spence told CN that 40 projects had come forward in August with an average of seven a day now approaching the Treasury for talks.

Speaking at Water UK’s Investment in Infrastructure conference in London today, Mr Spence said schemes to come forward have included bidders on Crossrail and projects ranging in size from service stations to “mega schemes”.

He added that commercial developments in ‘pre-let’ phase could qualify for the guarantees.

The legislation the government says it needs to issue the guarantees is expected to be passed this autumn.

The Infrastructure (Financial Assistance) Bill 2012-13 had its second reading in the House of Commons on Monday and will go to committee stage on 15 October.

A Treasury spokesperson said legislation still needs to be passed before they can commit.

“We are in detailed negotiations because we want to make sure if it goes ahead we can get projects moving ahead as soon as possible, but at this stage we cannot commit to guarantees,” the spokesperson said.

However, the news is likely to generate confidence that the bid to underwrite projects is working and Mr Spence insisted that the government was making announcements in order to start moving infrastructure forward.

He said: “People complain about the number of announcements government makes but if you don’t make an announcement you don’t get any change.

“[The policies] will make a difference, particularly in the medium term, rather than the short term.”

Investment in roads:

Prime minister David Cameron spoke at the Institution of Civil Engineers in March when he announced that he would risk “unpopular decisions” including privatising roads in order to get infrastructure built in the UK.

Mr Spence said he expected a report on new financing mechanisms for roads to be presented to the prime minister shortly.

He said: “There has been a lot of work done between the Treasury and Department for Transport; what was said at the time [of the PM’s speech] was that a focus study would report to the PM and we are near to that.

“A regulated asset base (RAB) model for roads is viable. Ministers will have to consider if it’s a sensible policy for creating investment in roads, for the consumer and for the fiscal effect.”

Mr Spence added that the government has gone to Brussels to confirm the EU doesn’t have concerns over UK Guarantees interfering with state aid laws.

IUK’s chief executive was also asked to respond to the CBI/KMPG survey released this week, which showed that three quarters of firms don’t expect to see any improvement in transport networks over the next five years, while two-thirds said energy and water infrastructure is unlikely to improve in that time.

He said: “If you are going to do any sort of opinion poll it is going to come back and say that government is ‘not very good’ because it’s unpopular at the moment.

“The construction sector has seen a sharp downturn emerging and beyond the M25 life is very difficult. There are a large number of companies who want government to spend more directly… so there is tension there.”

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