Chancellor Rachel Reeves is exploring ways to attract private investment to accelerate the government's development of new towns in England. She has initiated talks with major UK banks and investment funds about using public-private partnerships (PPP) to build infrastructure for these towns, a model that succeeds the Tony Blair-era private finance initiative (PFI), which faced significant criticism.
Treasury officials have commissioned a research paper from the British Infrastructure Taskforce, a group of leading investors, to determine how extensive private contracts—covering homes and amenities—can support new town developments. This move, first reported by the Telegraph, is expected to face opposition from left-leaning Labour MPs who have previously criticized private funding for public infrastructure projects, particularly hospitals and schools.
Many private funders remain skeptical of PPP deals since the collapse of Carillion in early 2018, which failed due to cost overruns on several hospital projects. Ministers have identified seven sites for new towns, mostly on the outskirts of existing cities, including Thamesmead in Greenwich, Tempsford in Bedfordshire, and urban regeneration areas in Leeds and Manchester. However, one site in Enfield, north London, appears unlikely to proceed after the new Conservative-controlled council rejected the plans.
Ministers have struggled to advance the project, citing planning restrictions, high material costs, and skilled labor shortages. Until now, PPP has been limited to neighborhood health centers and decarbonization projects for public buildings, as Labour prevented further deals for hospitals and schools. Reeves has highlighted the Thames Tideway tunnel—a £4.6 billion super sewer—and the Sizewell C nuclear power station as examples funded through a similar model called regulated asset base (RAB). The highways (financing) bill, announced in May, expanded RAB to include road infrastructure projects.
Under RAB, a private consortium finances and operates infrastructure, recovering investment through a regulated revenue stream. A Treasury spokesperson stated: “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 housebuilding in this country, unlocking economic growth.” They added: “We will continue to consider how private finance can support wider infrastructure ambitions, including leveraging private finance for the next generation of new towns.”
Under Treasury rules announced in Reeves’s first budget, officials can account for overall financial returns over a project’s lifespan, offsetting upfront costs and allowing more public funds. Last year, the Treasury planned to spend at least £725 billion over 10 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 over £6 billion in private finance under a revised scheme agreed by the Treasury last year. The Treasury has yet to announce a backer for the entire project.
