Treasury commissions research into PPP framework as ministers seek private backing for seven proposed sites
Chancellor Rachel Reeves has opened discussions with major UK banks and investment funds about financing infrastructure for new towns through a public-private partnership (PPP) model — a successor to the Private Finance Initiative (PFI) used under Tony Blair.
Treasury officials have commissioned a research paper from the British Infrastructure Taskforce, a body of prominent investors, to assess how private contracts covering homes and amenities could support new town development.
The move, first reported by The Telegraph, is likely to face opposition from left-leaning Labour MPs who have previously criticised private financing arrangements for public infrastructure, including hospitals and schools. Many private investors have also remained cautious about PPP deals since the collapse of construction firm Carillion in early 2018, which failed following cost overruns on several hospital contracts.
Ministers have put forward seven sites for new towns, largely on land on the outskirts of existing cities. These include Thamesmead in Greenwich, Tempsford in Bedfordshire, and urban regeneration areas in Leeds and Manchester. One site, in Enfield, north London, is considered unlikely to proceed after the newly Conservative-controlled local council indicated it would reject the plans.
Progress on the programme has been slow, with ministers citing planning constraints, high material costs, and labour shortages.
PPP has so far been applied only to neighbourhood health centres and projects to reduce the carbon footprint of public buildings. However, Reeves has pointed to the Thames Tideway Tunnel — a £4.6 billion sewer project beneath the Thames — and the proposed Sizewell C nuclear power station as examples of infrastructure funded through the regulated asset base (RAB) model. The highways (financing) bill, announced at the state opening of parliament in May, extended RAB funding to road projects.
Under RAB, a private consortium finances and operates infrastructure and recovers its investment through a regulated revenue stream.
A Treasury spokesperson said: "The government is not bringing back the old PFI model.
"A generation of new towns is an exciting opportunity to create communities at scale, and transform the way that housebuilding is carried out in this country, unlocking economic growth. We will continue to consider the ways in which private finance can support the delivery of wider infrastructure ambitions including leveraging private finance to help deliver the next generation of new towns."
Under rules set out in Reeves's first Budget, the Treasury can account for the projected financial returns on a project across its full lifespan, offsetting upfront costs and allowing greater deployment of public funds. In a separate infrastructure announcement, the Treasury last year set out plans to spend a minimum of £725 billion over ten years on UK-wide infrastructure, including £16 billion on new homes.
The £10 billion Lower Thames Crossing — the UK's largest planned infrastructure project after HS2 — requires more than £6 billion in private finance under a revised funding arrangement agreed by the Treasury last year. A backer for the full project has yet to be announced.
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