The Government has signalled a significant expansion in its approach to private finance, with the 2026 Budget confirming plans to develop a pipeline of public-private partnership (PPP) opportunities in defence. The announcement marks a further step towards recognising the role that private investment can play in delivering essential UK infrastructure.
The Budget, published on 28 October, commits the Government to:
“develop a pipeline for private finance opportunities – including public private partnerships – where they are value for money”
Further details are expected in the forthcoming Defence Financing and Investment Strategy, which will set out how private capital could support investment across the defence estate and wider defence infrastructure.
The commitment represents an important development in the Government's approach to PPPs. Having already recognised the potential for private finance to support the delivery of Neighbourhood Health Centres, ministers are now explicitly considering a pipeline of opportunities in another major area of public infrastructure.
For the Association of Infrastructure Investors in Public Private Partnerships (AIIP), the announcement is a welcome recognition that private finance can form part of the solution to the UK's long-term infrastructure challenges, following meetings we held with the Chancellor and MoD ministers.
In June, our chair, Lord Hutton, himself a former Defence Secretary wrote in CityAM about the opportunities for defence PPPs:
“A strategic programme could be developed for increasing solar array, wind turbines and other renewable and heat projects on MoD land, to give one example.
“There is a way to attract more capital investment – whether it is the better utilisation of MoD assets, or attracting capital from pension funds to invest in other priorities like NHS hospitals to meet the knock-on impacts of getting to 3.5 per cent of GDP on defence.”
A more balanced approach to assessing private finance
The Budget also confirms changes to the Treasury's Green Book, which provides guidance on how public investment projects should be appraised.
The discount rate used in economic appraisal will be reduced from 3.5% to 3.0%, placing greater weight on the long-term benefits of investment.
The updated 2026 Green Book also includes a dedicated annex on private finance models, recognising that private finance can deliver better value for money where the benefits of risk transfer and delivery efficiencies outweigh the higher cost of private capital.
Crucially, the guidance makes clear that decisions should be based on costs and benefits across the whole life of a project.
This reflects a central argument that AIIP has consistently made about the performance of historical PFI and PPP projects: the Government's lower borrowing costs should not be compared with the private sector's cost of capital in isolation.
Instead, assessments should consider the full costs of construction, maintenance, operation and risk over the lifetime of an asset, including the potential benefits of greater cost certainty and improved delivery performance.
A new infrastructure pipeline
The Budget also confirms that the Government will publish an updated Infrastructure Pipeline before the end of 2026, covering more than £750 billion of planned investment over the next decade.
This presents an opportunity to provide greater certainty to infrastructure investors and demonstrate where private capital can support the Government's ambitions.
AIIP believes it is important that social infrastructure, including hospitals, healthcare facilities, schools and other public buildings, is properly represented in the pipeline alongside major economic infrastructure projects.
The Government's updated Balance Sheet Framework also introduces greater transparency around private finance. Departments will be required to provide details of new privately financed infrastructure transactions for inclusion in the Infrastructure Pipeline, while the National Infrastructure and Service Transformation Authority (NISTA) will include new PPP liabilities in its annual reporting.
These measures should help establish a clearer picture of the scale and nature of privately financed infrastructure investment across government.
New Capital Investment through Extensions
26 strategic PPPs in the defence and security sector were signed three decades ago, with a capital value of around £7.5bn. Why not have the same ambition before 2030 when two thirds of those contracts expire?
Those partnerships included the Future Strategic Tanker Aircraft programme – which developed the RAF Voyagers used in combat against ISIS and for many humanitarian missions. Remarkably, this was the first UK aircraft programme that delivered on schedule and on budget since the Second World War.
A series of targetted, value for money extensions of existing PPP projects could provide the opportunity for new capital injections into key MoD assets to ensure battle readiness, whether that is via key refuelling or logistics aircraft or via improving the defence estate.
Turning commitments into projects
The Budget's commitments represent further evidence of a shift in the Government's approach to PPPs, recognising their potential application beyond individual programmes and across a wider range of public infrastructure.
The next step will be to translate this recognition into a credible pipeline of investable projects, supported by clear procurement arrangements and a consistent approach to assessing value for money.
The forthcoming Defence Financing and Investment Strategy will be an important test of how this commitment is taken forward.
AIIP and its members stand ready to work with government to develop practical partnership models that can mobilise long-term private capital, deliver value for taxpayers and accelerate the delivery of essential infrastructure.
Read the full Budget: Autumn Budget 2026 – GOV.UK
John Hutton Article for CityAM: I was defence secretary, here's how we fund our armed forces