The Liberal Democrats have proposed creating a national infrastructure fund, open to institutional and retail investors, to replace Private Finance Initiatives (PFI).
It hopes such a fund could leverage public money with private financing, to improve British infrastructure while providing good returns for investors.
Speaking at the Civilisation Congress 2009 today, Vince Cable set out proposals for the National Infrastructure Bank.
Cable claims the UK has the worst record for infrastructure investment in the OECD, and says a properly managed scheme would create jobs, boost economic recovery and promote environmental sustainability.
He says the Government's current preferred method of infrastructure funding, PFIs, is too reliant on bank finance. With the Government currently underwriting huge swathes of bank financing, and the effects of the credit crunch, PFI is no longer a suitable option, he adds.
"I believe that what we need is a mechanism for reducing the cost of capital - through Government guarantees - while tapping in to private savers' demands for long-term investment," Cable says.
"That is why I am proposing the creation of a National Infrastructure Bank."
The Bank would tap into demand for long-term investment opportunities from institutional and retail investors, he believes.
"Large-scale infrastructure financing will not happen, except in exceptional cases, through private markets alone and government cannot afford to fund public investment directly. There are various models available like the European Investment Bank that suggest a possible way forward," adds Cable.
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