UK’s biggest investors urge wider use of PPPs to fund infrastructure

Reports suggest the Chancellor, Rachel Reeves, is exploring new ways to attract private capital into major infrastructure and housing projects, including the Government's planned programme of new towns.

The Treasury is said to be examining a wider use of modern public-private partnership (PPP) structures designed to mobilise institutional investment while learning the lessons from past PFI projects, according to a paper from the British Infrastructure Taskforce, which advises the Government.

The proposals under discussion would see private investors play a larger role in funding infrastructure associated with large-scale housing developments, potentially using models similar to the Regulated Asset Base (RAB) approach already deployed for projects such as the Thames Tideway Tunnel and Sizewell C nuclear power station.

New PPPs are under consideration in limited situations, such as planned new neighbourhood health centres and decarbonisation projects. A paper written by the taskforce, seen by The Telegraph, recommends that the Treasury go further and use PPPs to pay for infrastructure that would usually be taxpayer-funded, including in education, hospitals and defence.

The investors said: “Overall, members would support an evolution of the PPP model to be used across wider tax-funded public services such as education, public transport and defence, but accept this is outside of current government policy.”

In the eight years since PFI was ended, 1,000 projects in countries such as Canada, Australia and the US have been established to crowd in investment into schools, hospitals and vital infrastructure. It's no wonder they are ahead of us in the league table for investing in critical infrastructure, as noted in the recent CBI report on PPPs.

Investor confidence needs a stable framework, and the report’s recommendations offer a way forward while learning the lessons of the past.

Rather than delivering infrastructure as isolated schemes, the ‘precinct model’ develops neighbourhoods with transport, housing, offices, shops and public services planned together. The Government can deliver a hospital or health centre without upfront capital, while private partners assume the risk associated with new homes or commercial premises. This is what forward-looking administrations in Australia and Canada did when faced with similar financial constraints to the UK.

If you compare PFI with traditional procurement, we built twice as many hospitals in half the time, and a review of Australian PPPs found cost savings of 31%.

With limited time and capital before the next election, that’s hard to ignore.

Our members stand ready to help deliver on the Government’s ambitions.