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Council pension funds could help fund infrastruture projects

"Osborne to raid £140bn town hall pension pot" says the headline to a report (£) in The Times. It actually refers to an proposal from councils to offer to fund infrastructure projects rather than making more conventional, private sector, commercial investments. But presumably they would only provide such funding if the safeguards and returns were attractive. Although there would also be a political consideration in some councils wanted some local schemes, such as for new roads, going ahead.

Cllr Merrick Cockell, the chairman of the Local Government Association, and leader of Kensington & Chelsea council, said:

“I think the timing is right. We can use the collective force of £140 billion to work for both the financial strength of pension funds and for local and national infrastructure needs. But we need to spread the risks and make sure the schemes are viable.

“It is difficult to get the same returns from public projects as commercial returns. The Government could help subsidise the rate of return to achieve that level by adding 1 or 2 per cent.”

“If you took, say, a 6 per cent level of investment then £2.5 billion could be available from London pension funds. This could be invested in bridges, houses or toll roads. Other countries like Canada, Australia and South Africa have done this. The Local Government Pension Scheme is in too many slivers of funds and we are interested in looking at wider investments.”

The trade unions are suspicious. The GMB warning that infrastructure schemes are "dodgy."



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