45. Commercial banks are not the only source of finance for Private Finance projects. The Treasury Infrastructure Finance Unit (TIFU) was set up last year (cf. paragraph 23 above). The European Investment Bank (EIB), which lends on a not-for-profit basis, and has AAA status, is a very significant finance provider and has lent €3-4bn. of funding for PFPs in the United Kingdom since 2005. The financial crisis has increased the EIB's attractiveness as a source of funding for PFPs and it committed over EUR 1bn in 2009 to projects in the UK (p 16).
46. The role of the EIB raises the question whether Private Finance Projects might benefit from the presence in the market of other providers also able to offer keenly competitive finance at commercial standards of rigour and due diligence. Asked if there might be a role on these lines for a National Infrastructure Bank (NIB) in the United Kingdom, Mr Simon Brooks of the EIB replied that "nobody in Europe needs to introduce a NIB because they have got us!" (Q 75). In reply to a similar question, Mr Paul Davies of PwC saw value in an NIB which complemented the market on the lines of the Treasury Industry Finance Unit (TIFU) or acted as a relatively economical lender alongside private sector banks. But an NIB designed to crowd out private sector lenders could deprive the market of well-honed skills (p 234).
47. The Economic Secretary to the Treasury said he was "very interested in the idea of a national infrastructure bank" and referred to the recent announcement of the setting up of Infrastructure UK13 "looking at ways in which infrastructure can be financed" (Q 619).
48. One role for a National Infrastructure Bank might be to help channel pension fund finance into infrastructure projects, which could fit well with the funds' longer-term liabilities. The scope seems significant. A report by the OECD14 estimates that $500billion worldwide could be invested in infrastructure if 3% of total global funds held by pension funds could be accessed (Ms Kate Mingay, Department of Transport, supplementary evidence, p 249). A non-profit investment bank could attract pension funds by offering an option in addition to gilts and long-term private sector investment.
49. There may or may not be enough lenders in the market already to finance public infrastructure, even in a period of restricted credit such as we now face. It is too early to tell whether the Treasury Infrastructure Finance Unit (TIFU) will bridge the gap. The pros and cons of establishing a National Infrastructure Bank should be kept under review.
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13 Announced by the Chancellor of the Exchequer on 9 December 2009 to provide a new strategic focus in government across the full range of infrastructure sectors (Pre-Budget Report, Securing the recovery: Growth and opportunity. HM Treasury. Command Paper 7747, 9 December 2009).
14 G. Inderst, "Pension Fund Investment in Infrastructure", OECD Working Paper on Insurance and Private Pensions, January 2009.