Budget 2021: UK Infrastructure Bank to launch in Leeds with £12bn to deploy into ‘green industrial revolution’
The UK’s first infrastructure bank will be launched in Leeds, with an initial £12bn to deploy into a “green industrial revolution”, the chancellor has announced.
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Rishi Sunak used his Budget speech today to set out further details of the new institution, following an earlier announcement at the Spending Review in November that it would launch this spring.
Mr Sunak said that the lender, which is designed to invest into private and public projects, would have “an initial capitalisation of £12bn”, and was expected to support “at least £40bn of investment in infrastructure”.
“Our future economy needs investment in green industries across the United Kingdom so I can announce today the first ever UK Infrastructure Bank.
“Located in Leeds, the bank will invest across the UK in public and private projects, to finance the green industrial revolution,” Mr Sunak said.
Budget documents set out HM Treasury funding to the new entity of £7.5bn over the five years up to and including 2025/26.
A Treasury spokesperson told Social Housing that the "scorecard impact" of the bank is lower than the £12bn of funding because spending is offset by interest income expected from investments, while £4bn of lending to local authorities has a lower net impact to public sector net debt than the lending and investment into private projects will do.
On the question of the extent to which the fund will be accessible for investment into housing projects by UK registered providers and councils, the spokesperson said: "All further operational detail will be set out in due course when it’s functioning".
The chancellor also confirmed that his department, HM Treasury, would form part of a new economic campus in Darlington along with the Department for Business, Energy & Industrial Strategy (BEIS), Department for International Trade (DIT), and Ministry of Housing Communities and Local Government (MHCLG).
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The new hub was first announced in last year’s March Budget, with plans for around a fifth of all Treasury staff to relocate. Last month, plans for MHCLG to move to set up headquarters in Wolverhampton were announced. Other departments including BEIS were also preparing for the move north at the time, including recruiting for a director general for net zero buildings and industry.
Speaking in parliament today, Mr Sunak said: “Our future economy demands a different economic geography. If we are serious about wanting to level up, that starts with the institutions of economic power, and few institutions are more powerful than the one I am enormously privileged to lead, the Treasury.
“Along with the other critical economic departments including BEIS, DIT and MHCLG, we will establish a new economic campus in Darlington.”
Mr Sunak also confirmed that a commitment to greening the economy would be reflected in plans to launch a sovereign green bond. Budget documents indicate that the “green gilt framework” for the issuance will be published in June which will detail the types of expenditures to be financed to “help meet the government’s green objectives”.
The documents add that “further issuance [will] follow later in 2021 as the UK looks to build out a ‘green curve’.
Elsewhere, Mr Sunak announced that he will set a new remit for the monetary policy of the Bank of England which will “reflect the importance of environmental sustainability and the transition to net zero”.
In a letter to the bank sent the same day, Mr Sunak wrote that the remit should reflect government’s strategy for "strong, sustainable and balanced growth that is also environmentally sustainable and consistent with the transition to a net zero economy".
Despite a slight ’green tinge’ to the budget, there was no reference to the 10-year, £3.8bn Social Housing Decarbonisation Fund promised in the Conservatives’ 2019 manifesto speech. A £50m pilot of the scheme was outlined at July’s post-pandemic ’Mini-Budget’ last year, and extended funding of £125m overall was confirmed at the spending review, but details of the full scheme are yet to materialise.
Other budget announcements today include an extension to the £20-a-week Universal Credit uplift, and government guarantees for new five per cent deposit mortgage products.
Update: at 7.28AM, 04/03/2021, the article was updated to include responses received from Treasury.
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