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Funding for major infrastructure projects

Summary

The National Infrastructure Commission defines economic infrastructure as energy, transport, water and wastewater (drainage and sewerage), waste, flood risk management and digital communications.

The government also includes social infrastructure such as schools, hospitals and housing in some infrastructure policies and publications.

Infrastructure plays a crucial role in a country’s economic welfare. For instance, a reliable source of energy allows companies to function more efficiently; a transport network enables producers to move goods to consumers; and the provision of schools provides the foundation for more highly-skilled workers of the future.

Better quality infrastructure allows an economy to be more efficient, improving its productivity, and raising its long-term growth rate and living standards.

There are three ways in which infrastructure projects can be funded:

• Public funding: projects are funded by the government and wider public sector. The High Speed 2 railway will be funded publicly.
• Private funding: projects are funded by private companies who plan to recoup and earn a return on their initial investment via customer bills or charges over several years. Heathrow Terminal 5 was entirely funded by private investment.
• Mixed public/private funding: funding is drawn from both the public and private sector. Network Rail maintains and develops the railway infrastructure using Government grants, government-backed borrowing and private sector funding drawn from charges levied on train operators.