Pension funds could help save major projects
Local government’s £97bn pension fund could be used to help plug an investment shortfall in public building projects.
The suggestion comes in New Local Government Network’s (NLGN) Capital Momentum report, which argues new funding strategies are needed to save some of the £12bn of building projects under threat from government spending cuts.
With housing, transport and education likely to be worst hit, the report says councils should think now about how schemes could be funded through alternative sources.
The report suggests the Local Government Pension Fund (LGPF), municipal bonds and council reserves could be used to plug the shortfall.
There is currently a deficit in the LGPF, but NLGN argues that devoting some of its funding towards building projects would offer a stable and long-term investment for the fund while supporting local job creation and the wider local economy.
But there is currently no mechanism for local government pension funds to invest directly in a pool of infrastructure projects provided by England’s local authorities and sub-regional and regional agencies.
Report author Tom Symons said there is a need for pension portfolios to have a diverse range of investments following nosedives in the stock market over recent years and recommends the development of new investment vehicles to enable this.
Mr Symons, a senior researcher at NLGN, added: ‘Pension funds present enormous potential to invest in infrastructure. Just 1% of the local government pension scheme would produce close to £1bn of investment opportunity for local capital projects.’
The report also warns against curtailing the ability of local authorities to raise money through the Public Works Loan Board, as has happened during previous economic downturns. It argues that this form of prudential borrowing is vital to ensuring infrastructure projects are well resourced.
Capital Momentum: New financing options for locally driven capital investment, www.nlgn.org.uk
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