The government body set up last month to deal with the UK’s £400m infrastructure backlog is considering the idea of setting up a bank specifically to fund projects

A source close to the unit, called Infrastructure UK (IUK), said: “It’s looking at ways to find new sources of finance for infrastructure schemes. Part of that is looking at the possibility of an infrastructure bank.”

The source added: “The idea implies the government providing long-term funding for infrastructure, but whether that could act as seed-corn funding for private investment is open to question.”

The comments will add weight to a campaign for a dedicated source of public finance, and idea first proposed by Vince Cable, the Liberal Democrat Treasury spokesperson, last autumn. George Osborne, the shadow chancellor, has also called for an infrastructure fund to be set up.

James Stewart, chief executive of IUK said: “We’re looking at a number of options for financing infrastructure and attracting private sector capital.”

We’re looking at a number of options for attracting private sector capital

James Stewart, IUK

Infrastructure UK was set up to advise the government on funding and prioritising infrastructure. It brings together the Treasury’s £2bn PFI rescue unit, the bulk PPP specialist Partnerships UK, and the department’s internal PFI team.

The news comes as the Institution of Civil Engineers (ICE) launched its UK infrastructure manifesto. It also calls for an infrastructure bank as one of its three proposals for dealing with infrastructure problems.

The ICE welcomed the government’s statement, and said the bank could help where the private sector failed to step forward, by developing innovative forms of finance, and providing loans, equity or venture capital for infrastructure firms.