More reliable information needed on infrastructure pipelines to ensure private investor confidence, NAO warns

The National Audit Office (NAO) has called for clearer objectives and more reliable information on future UK infrastructure projects to effectively mobilise private finance.

In a new report published today, the NAO said the government needed to improve the level of detail in the National Infrastructure and Construction Pipeline in terms of upcoming investment opportunities in order to ensure investor confidence.

The NAO said providing more consistent and predictable information on projects would reduce uncertainty around infrastructure investment and financing, supporting longer-term planning by investors and helping to create a more competitive market.

The report, ‘Lessons learned: private finance for infrastructure’, comes as the government establishes its 10-year infrastructure strategy, which is aiming to provide a more stable and transparent pipeline of major projects to attract private capital.

It includes 12 lessons the NAO believes the government needs to take on board to prevent cost and delivery time overruns on large infrastructure programmes, including ambitions on housebuilding and the net zero transition.

Departments should develop robust business cases with clear assessments of the benefits and risks of using private finance, including mechanisms to balance cost considerations wit the need for appropriate returns for investors, the report said.

Global financial markets should also be considered and the attractiveness of the UK as a place for investors, according to the NAO.

But the body warned against making private finance decisions as a means to avoid accounting classifications or achieving “off balance sheet” investment, adding that if costs are not accounted for properly, taxpayers will be exposed to the risks of higher public expenditure over the long term. 

The report also urged ministers to adopt a commercial strategy to deliver successful outcomes, using commercial expertise to oversee an efficient procurement process and effectively manage supplier contracts while putting in contingency plans including alternative options to mitigate supplier risk.

Gareth Davies, head of the NAO, said: “The government has set out its ambitions for growth over the next decade. Private finance can contribute to that growth through investment, provided that important lessons are applied from different models of financing infrastructure in the UK and internationally.” 

“Government should take a transparent approach to assessing the role of private finance in major investments, showing how value for money for taxpayers will be achieved alongside appropriate returns for investors.”

The government’s major infrastructure programmes include a commitment to build 1.5 million homes by the end of this Parliament, decarbonising 95% of UK energy production by 2030 and completing 46 hospital rebuild or refurbishment schemes under the £20bn New Hospital Programme.