Helm, D R: Infrastructure Investment, the Cost of Capital, and Regulation: An Assessment, Oxford Review of Economic Policy

Publication Date
01 January 2009

This article considers the role of infrastructure in improving economic performance in the United Kingdom. It contends that Britain faces an enormous infrastructure investment challenge over the next decade and that its existing infrastructure is often not fit for current or future purposes it was intended for.

The article looks at regulated asset bases and considers how they can be developed to provide credible long-term contracts over a wide range of activities. It examines how the financial regulatory regime can complement this commitment, notably through the split cost of capital and the indexation of cost of debt approaches.

It claims that by entrenching regulated asset bases, moving to split cost of capital and creating effective delivery bodies, a basis can be provided for infrastructure investment programmes into the future.

The article concludes by setting out the building blocks of a credible regulatory framework for infrastructure, together with the impacts on reducing the cost of capital. The role of the state in reinforcing this commitment and the associated institutions are also set out.