LONDON: Under the Scheme, the Treasury guarantees that lenders to infrastructure projects will be repaid in full and on time, irrespective of project performance. The NAO is calling for the Treasury to be rigorous and objective in assessing whether the guarantees, which transfer risk to the public sector, are genuinely needed.
“The UK Guarantees scheme was introduced as a response to tough financial market conditions for infrastructure finance. Market conditions are now much less difficult but the Scheme is still supporting lending for new infrastructure projects. The Treasury takes a narrow view that guarantees are value for money if the fee covers the risk. It is good that Treasury has a formal governance process and commercial specialists to help evaluate, manage and set a price for risks to the taxpayer. However, we question whether this approach can measure long-term risks to taxpayers reliably. As market conditions improve, the Treasury should ensure that it is rigorous and objective in ensuring that guarantees for projects are genuinely needed and that the projects supported bring significant public value.”
Amyas Morse, head of the National Audit Office, 28 January 2015
The National Audit Office is calling on the Treasury to be rigorous and objective in assessing whether government guarantees for new UK infrastructure projects are genuinely needed and the projects are likely to bring significant public value.
The UK Guarantees scheme was introduced in 2012 because of adverse credit conditions, to avoid delays in investment in UK infrastructure projects that may have stalled. Since then, market conditions have improved. In today’s report, the NAO considers that the Scheme can play a role in enabling progress in some significant infrastructure projects. The Treasury has assembled an experienced commercial team and internal governance arrangements to measure and manage risks to the taxpayer.The Scheme is currently due to close in December 2016 and can support up to £40 billion in finance.
