Budget analysis: Treasury sets up infrastructure unit for long-term investment

The government has signalled its intent to continue relying on private companies to provide the vast majority of funding for new infrastructure projects such as roads and power plants. However, in yesterday's budget, the chancellor Alistair Darling conceded the government would have to play some role, announcing the creation of a green investment bank that would provide £2bn of upfront funding to stimulate private investment. He also said a Treasury unit, Infrastructure UK (IUK), would draw up a new national infrastructure framework to give clarity over the next 10-50 years. The budget says the UK needs to spend £40bn-50bn on infrastructure each year until 2030, much higher than the current average of £30bn a year. The new investment bank will put £1bn from the sale of existing assets – Darling cited the Channel tunnel rail link – into its £2bn fund. The bank will focus on transport and energy projects, notably offshore wind power stations, where the lack of investment is most feared. IUK will also draw up a national infrastructure framework, to help co-ordinate investment decisions, to be published by the end of this year. It will set out a long-term, 50-year vision for UK infrastructure, and specify "outcomes" expected over the next 10 years. IUK will also investigate the cost of major civil engineering works, following Treasury concerns that building costs in the UK are higher than in Europe. Locally, regional development agencies will establish growth funds within their capital budgets to promote "high-value investment". The government is also piloting accelerated development zones, in which selected councils will receive capital grants of £120m to support key building projects and commercial developments that encourage growth. The pilots will help establish whether other funding ideas, such as tax increment financing, are viable.