9. Are there realistic alternative roles for private finance than the current PFI-type private finance models? Should the UK be aiming for more diversity in private finance models? Would a national infrastructure bank (such as the proposed Dodd-Hagel NIB in the US) add any value in the UK? Should the public sector have a more hands-on role in financing and/or delivery?
PFI not the only solution: In addition to the SoPC4 PFI project structure, there are already many other delivery models being employed for private sector investment in public infrastructure, such as those discussed in the 2008 Treasury paper-joint ventures, strategic alliances, strategic infrastructure partnerships, concessions, using a integrator approach and other hybrids of these structures,36 and others currently in use in the market, such as Local Asset Backed Vehicles and Private Developer Schemes.37 Many of these methods are frequently employed and embraced by the private sector whose approach is flexible and capable of innovation.
Other private finance models could include the creation of infrastructure utilities, like the English and Welsh water utilities, rewarded on the basis of a regulated return on assets, for example a road network privatisation. But this would not be appropriate for construction projects-it can only work where a business can be created from existing operational assets.
Another option would be to harness the life insurance and pensions funds' long-term appetite for infrastructure investment and its stable long-term cashflows, for example by relaxing the regulatory restrictions on the proportion of funds able to be invested in such assets (as mentioned above).
It is hard to see what value a NIB would add. It is likely that it would invoke issues of state aid that would prove difficult to resolve, and it would tie up more public capital where the greatest element of infrastructure capital is already provided by the public.
Public sector is hands-on already: The public sector already has a hands-on role in financing, in the form of funding competitions which are now required for every project, and in delivery in its role in the original design of the service output they require.