What is envisaged is the local authority pension scheme acting as an initial investor in infrastructure, with private sector money following in behind. That is fine until the project does not attract private sector support – or worse than that, it fails. And infrastructure is notoriously hard to deliver and then get a return on.
To make matters worse, this Government is making such investment harder. The best recent examples are water companies, in which pension funds have invested very heavily. In most cases they are losing money for their pension investors. But the language and approach of Labour cabinet ministers, particularly the PM and Steve Reed, the Defra secretary, is making a difficult situation worse.
The water companies need private investment, such as the massive support that the USS, the Universities pension fund, gave to Thames Water several years ago. But the USS trustees are definitely regretting that investment now; in my view no pension fund will touch a water company in the UK for at least five years.
The Government’s approach, the uncertain regulatory future, the obvious struggle to get any return for members’ investment and so much more mean that this water infrastructure, which needs investment, will be shunned.
This instance highlights the fact that the hard work will be to create the products for the pension schemes to invest in.
For example, the only way Reeves will get the finance to invest in nuclear will be to create proper government-backed infrastructure bonds for pension schemes that are attractive in terms of risk and return.
The Treasury shows no inclination that they want to support the nuclear investment we so clearly need in this country. And yet, without Treasury support and guarantees no UK pension or overseas pension funds will invest in UK nuclear infrastructure.