Creating an ideal partnership

By Sir Merrick Cockell | 12 January 2016
  • Sir Merrick Cockell

For some time I have been advocating the case for public sector pension investment in infrastructure and, like the slowly dampening winter weather, when it rains it pours.

True to his word, the chancellor has made fast work of following up his ‘we are the builders’ pledge.

Not only are we seeing the Department for Communities and Local Government (DCLG) forging ahead with its consultation on Local Government Pension Scheme (LGPS) fund pooling, but the creation of the National Infrastructure Commission was swiftly followed by its call for evidence on innovative ways to build and fund British infrastructure development.

Pooling will allow funds to harness resources, use economies of scale and share talent in order to make a difference in investing in infrastructure. However, it only solves part of the problem. While it may allow us to access sufficient funds needed to invest in larger-scale projects, there remains the need for an efficient mechanism for matching projects/sponsors with investors.

In The MJ some months ago I raised the idea of an LGPS body which could match infrastructure opportunities with prospective investors, acting almost like a clearing house.

I believe local government is the ideal partner for these private infrastructure deals. Innovative councils can identify projects suitable for direct investment and are in a key position to collaborate with investors to develop these ideas. It also goes without saying that they negate a certain level of political risk by acting as a local partner in a multinational consortium.

This body would be responsible for gathering information about potential infrastructure and housing investments, and subsequently matching councils and private investors together, presenting the right opportunities to these interested parties, so they could put their own money forward through co-investment.

I believe this body will be most successful if it were also deploying capital directly into many of the same projects.

Recently, the National Audit Office identified 37 of 106 projects that are at risk of not being delivered or remaining unfinished due to a variety of issues, with the watchdog highlighting that government response had been poor.

A dedicated body acting on the behalf of investors and local government would surely go a long way in eliminating this fall down.

Furthermore, the stakeholder LGPS funds will be directly connected to their regions – local partners with local knowledge on locally important infrastructure projects.

Sir Merrick Cockell is chairman of the London Pensions Fund Authority

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