|The Government’s infrastructure minister has dashed hopes that spending on road, rail and other public projects will deliver a quick recovery by claiming “you can’t manage it like that”.
Lord Deighton, the former chief executive of the Olympics organising committee who joined the Government as Commercial Secretary to the Treasury in January this year, also revealed that sovereign wealth funds are “lining up” to invest in the UK but the Government has so far failed to make major projects “financeable” for them.
His comments will deal a blow to hopes that Britain will be able to build its way out of stagnation, as many economists have urged. Last December, the Chancellor set aside £5bn of public money for infrastructure spending this year and next and added a further £3bn annually from 2015 in the March Budget. He has also set aside £40bn of guarantees to the private sector to attract urgent investment.
Speaking at the City Week annual conference, Lord Deighton said: “Much as we’d like to turn it on like a tap to create growth and jobs in the very, very short term, the reality is this is stuff you need to get right over 5, 10, 15, 20 years. It has the convenient short-term characteristic of stimulus but you can’t manage it like that.”
The Chancellor laid out a National Infrastructure Plan more that 18 months ago that identified a pipeline of 550 projects worth £310bn and pledged £40bn of taxpayer guarantees to help convince pension funds to invest. So far, though, only two projects have found backers - the underground extension to Battersea and a biomass energy project.
In an apparent criticism of the Government’s handling of infrastructure before his arrival, Lord Deighton said: “When I took this job the working assumption was that raising the money was the hard bit. For me, the challenge is getting all these projects into a financeable state so you can take them to the capital markets.
“The capital markets are increasingly hungry for these infrastructure projects. There is a lot of interest from domestic and international investors.”
Citing existing sovereign wealth fund investment in Britain’s airports, he said: “They like the returns, they like the way the UK does business, and if we offer them the equivalent opportunities they will be very keen to participate.”
Qatar is reported to be ready to invest as much as £10bn in the UK, but has been unable yet to agree acceptable terms.