Reeves seeks private capital to accelerate England’s new towns

UK Chancellor Rachel Reeves has initiated talks with major banks and investment funds regarding public-private partnerships (PPPs) to accelerate the construction of new towns in England. The Treasury has commissioned a research paper from the British Infrastructure Taskforce to determine how extensive private contracts can support infrastructure, housing, and amenities in these developments. This approach is positioned as a successor to the Tony Blair-era private finance initiative (PFI), although the Treasury explicitly denies bringing back the old model.

The proposed funding mechanism draws on the regulated asset base (RAB) model, recently utilised for the Thames Tideway tunnel and the Sizewell C nuclear power station. Under this framework, private consortia finance and operate infrastructure, recovering investment through regulated revenue streams. The highways financing bill, announced at the state opening of parliament in May, expanded the RAB model to include road infrastructure projects, aligning with Treasury rules from Reeves’s first budget that allow officials to account for overall financial returns over a project’s lifespan to offset upfront costs.

Seven sites have been identified for new towns, including Thamesmead in Greenwich, Tempsford in Bedfordshire, and parts of Leeds and Manchester. Progress has been constrained by planning restrictions, high material costs, and shortages of skilled labour. One proposed site in Enfield, north London, appears unlikely to proceed following opposition from the new Conservative-controlled council, which indicated plans would be refused.

The strategy faces potential resistance from left-leaning Labour MPs, who have previously criticised attempts to secure private funding for public infrastructure, particularly hospitals and schools. Private funders have also expressed scepticism regarding PPP deals following the 2018 collapse of the building company Carillion, which resulted from cost overruns on hospital projects. Until recently, PPPs were limited to neighbourhood health centres and decarbonisation projects for public buildings after the Labour government prevented further deals for hospitals and schools.

The Treasury has outlined plans to spend a minimum of £725bn over 10 years on UK-wide infrastructure, including £16bn on new homes. A Treasury spokesperson stated that the government is leveraging private finance to help deliver the next generation of new towns to unlock economic growth. Meanwhile, the £10bn Lower Thames Crossing, the UK’s largest planned infrastructure project after HS2, requires more than £6bn of private finance, though a backer for the entire project has not yet been announced.