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The UK needs a special bank to finance infrastructure projects
The government should help deliver Britain's infrastructure needs by establishing a national infrastructure bank and reduce the cost of capital by expanding the number of sectors covered by a regulatory asset base.
This should include nuclear power, renewables and carbon capture and storage.
Those recommendations came in a report published this week by the Policy Exchange, partly authored by regulatory guru Dieter Helm.
The right-of-centre think-tank said that to renew and replace much of the country's "tired infrastructure", up to £500 billion would need to be spent by 2020, covering transport, energy, water, flood prevention and energy efficiency.
The report said existing patterns of obligations and levies created on an ad hoc basis should be replaced by a "low carbon obligation". It also called for a more consistent approach on the allowed return and cost of capital.
"Complexity and inconsistency deter investors," said the report. "Understanding the nuances of each industry every five-year cycle is not something that encourages investment - capital market participants and analysts have trouble understanding the plethora of small differences between sectors and periods."
It added: "Introducing greater consistency across the regulated sectors should lead to a lower cost of capital."
The think-tank urged ministers to establish an infrastructure bank, similar to institutions created in Germany, Australia and Ireland, which would encompass the UK's existing public works loan board, the Treasury infrastructure finance unit and Partnerships UK.
The report also urged the removal of investment grade rating requirements for regulated industries. The authors said there should be a "series of explicit credit and liquidity ratios" instead, which should be embedded in regulatory licences. If tripped, they would lock up cashflow.
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