Priority Action Area #2

Enable action at the local scale, that is mindful of the national

The existing division of local infrastructure responsibilities between national government, local authorities, and the private sector creates fragmentation and silos that constrain the development of integrated approaches. Local authorities and other agents must be enabled to cultivate alternative ways of developing and managing local infrastructure of all types. Demands for new infrastructure and maintenance of existing infrastructure are rising, and governments are under pressure to find additional funding and ways of financing infrastructure assets and systems. Local and sub-national actors, including local authorities and community trusts, have shown they are able to take a lead in developing alternative infrastructure business models by combining new and different sources of revenue and longer-term capital. The Greater Manchester City Region’s ‘earn-back’ infrastructure investment model is one such example. A combination of local council tax levies, prudential borrowing and the pooling and scaling of local assets has provided a city region-wide transport infrastructure fund to invest in projects that generate a return which can be subsequently reinvested back into the city region. These approaches are alternatives in the sense of innovating beyond the current status quo or conventional wisdom. Their aims are to deliver a coordinated approach to infrastructure planning that identifies synergies by bundling infrastructures together into the same business model. Limited sub-national institutional autonomy, including the ability to raise and retain local revenue, prevents UK local authorities and other local actors from assuming greater responsibility for planning, co-ordinating, implementing public capital and levering in private investment in infrastructure. It is often national and local governments that have to shoulder the initial risks of infrastructure development in order to create the environment for private finance to then invest in projects that can demonstrate that they are able to generate yields and returns.[23*]

Recommendation 4: National and local policy frameworks should be realigned to focus on delivering wider societal benefits and to enable local infrastructure business models to emerge that can provide local solutions that are complementary with mainstream systems.

Recommendation 5: Effective operation of local alternative infrastructure business models requires greater fiscal decentralisation, complemented by a stronger and statutory devolved role for cities and localities in the planning, development and delivery of infrastructure.

Recommendation 6: Provide support for a wider range of innovative local infrastructure financing mechanisms, including tax increment financing, municipal bonds, social impact bonds and crowd source funding approaches.

City Deals: A first step?

The UK Government has been considering the role of cities in supporting economic recovery, rebalancing and infrastructure planning and delivery. Between 2011 and 2014, [29] ‘City Deals’ were signed between Local Authorities, Local Enterprise
Partnerships and Central Government. A number of City Deals were designed to introduce new forms of infrastructure funding and financing. The City Deals that agreed ‘innovative’ infrastructure models saw central Government maintain
strict fiscal control over their operation and there have been highly uneven outcomes in per capita financial allocations to city-regions. Whilst the City Deals are an important development, when viewed in an international context they do not represent radical decentralisation. A more comprehensive and systemic approach to providing stronger fiscal autonomy and public service integration across cities and local areas, within a stable national
framework, to support infrastructure investment and delivery, is required. [24*]