London’s infrastructure could receive an investment boost of £2.5bn a year if the capital’s councils go ahead with a plan to combine local authority pension funds.
Council leaders are in talks to combine pension funds to create a £30bn pot, which would free up £2.5bn a year to be pumped into transport, waste disposal, social housing and recycling projects in London.
The pension funds from London’s 33 boroughs, Transport for London and the London Pension Authority, which is responsible for the pensions of workers formerly employed by Great London Council, would be included in the plan.
London Chamber of Commerce and Industry director of policy and public affairs Dr Helen Hill believes the money could provide great support for the improvement of the capital’s infrastructure.
Dr Hill said: “How to finance new infrastructure projects is an important part of delivering a London infrastructure that will support businesses and enable growth in the capital’s economy.
“The contribution of pension funds from London Councils would be a welcome step towards raising the necessary finance to meet the many current and future projects London needs to progress.”
Mayor of London Boris Johnson has also supported the idea of a potential combined pension fund investing in the capital.
Johnson said:”What London needs is a serious infrastructure investment fund. It is mystifying that these pension funds are sitting on huge quantities of British assets and investing them around the world and not [here]where they would get a fantastic return.”
Potential pitfalls for the plan include how much taxpayers could be charged to fill in black holes in the funds, while individual councils would lose their say in how the funds were invested.
However, a combined pension fund would be able to reduce administration fees by as much as £30m a year, according to a report seen by London Councils.
A London-wide pension fund would need to avoid supporting investment projects which it could benefit from politically and other similar “conflicts of interest”, the report said.
Chancellor George Osborne has been keen to encourage local authority pension funds to reinvest in the UK to help boost the economy after recommendations from a Hutton report on pensions.