Chancellor Rachel Reeves is actively examining how to attract private investment to accelerate the government’s stalled new towns programme, opening talks with the UK’s largest banks and investment funds about building the infrastructure needed for the planned communities. The move signals a return to public-private partnerships (PPPs) as a successor to the widely criticised Private Finance Initiative (PFI) of the Tony Blair era, though the Treasury insists it will not simply revive the old model.
Talks with investors and the new towns programme
Reeves has begun discussions with leading financial institutions about using PPPs to fund essential infrastructure — including homes, roads and amenities — for the seven sites England’s ministers have identified for new towns. Treasury officials have also commissioned a research paper from the British Infrastructure Taskforce, a group of leading investors, to establish how private contracts can support the developments.
The shortlisted locations, each intended to deliver at least 10,000 homes and some as many as 40,000, are: Tempsford in Bedfordshire, which could accommodate up to 40,000 homes around a new East West Rail station; Crews Hill and Chase Park in Enfield, north London, planned for up to 21,000 homes; Leeds South Bank (up to 20,000 homes); Manchester Victoria North (at least 15,000); Thamesmead in Greenwich, south London (up to 15,000, with a possible Docklands Light Railway extension); Brabazon and the West Innovation Arc in South Gloucestershire (up to 40,000); and Milton Keynes in Buckinghamshire (around 40,000, building on its legacy as a new town).
An earlier New Towns Taskforce had drawn up a longer list of 12 potential sites, but the government narrowed it after further assessment. Six other locations — Adlington, Heyford Park, Marlcombe, Plymouth, South Barking and Wychavon Town — are not proceeding as new towns but may receive support through existing housing programmes.
The programme is designed to ease the housing crisis, create affordable homes and boost economic growth, with each new town envisioned as a well-connected community with green spaces. However, ministers have struggled to make headway so far, citing planning restrictions, the high cost of materials and shortages of skilled labour. One of the seven sites, Enfield, now appears unlikely to go ahead after the Conservative-controlled council said it would refuse planning permission.
The regulated asset base model
The financing structure the government is looking to is the regulated asset base (RAB) model, which has already been used for major infrastructure projects including the Thames Tideway “super sewer” and the Sizewell C nuclear power station. Under RAB, a private consortium finances, builds and operates a piece of infrastructure — such as a bridge, tunnel or energy plant — and recovers its investment through a regulated revenue stream. Crucially, consumers may contribute small amounts on their bills during the construction phase, which is intended to lower overall financing costs and potentially save billions compared with other private finance models.
Chancellor Reeves has highlighted Thames Tideway, a £4.6 billion tunnel running next to the River Thames, and Sizewell C, estimated at £38 billion, as examples of how RAB can work in practice. The model was extended to road projects through the Highways (Financing) Bill, announced at the state opening of parliament in May. The £10.6 billion Lower Thames Crossing, the UK’s largest planned infrastructure project after HS2, is also being set up under RAB and requires more than £6 billion in private finance. The Treasury has yet to announce whether it has found a backer for the whole scheme.
The government stresses it is “not bringing back the old PFI model,” but the PPP framework for new towns shares similarities with PFI, in which private firms finance projects upfront and the state repays them over time. Treasury rules announced in Reeves’s first budget allow officials to account for the overall financial returns on a project over its expected lifespan, offsetting the upfront cost and enabling more public funds to be deployed. The Treasury has set out plans to spend a minimum of £725 billion over 10 years on UK-wide infrastructure, including £16 billion on new homes, alongside a £2.3 billion funding package for regeneration in the North and Midlands designed to attract further private investment. Funding for the Oxford-Cambridge growth corridor is being doubled.
Opposition and scepticism
The move is expected to face strong opposition from many left-leaning Labour MPs, who have criticised previous attempts to draft private money into public infrastructure projects. PFI was introduced in 1992 by the Conservatives and expanded significantly under Tony Blair’s government, often to keep debt off the public balance sheet. A later version, PF2, was launched by George Osborne in 2012 but met similar criticism. The National Audit Office found no evidence that PFI schemes were cost-effective compared with publicly financed options, and some PFI hospitals proved significantly more expensive. Labour MPs argue that private finance is often more costly than direct public borrowing and has left taxpayers with long-term debts.
Private funders themselves have become cautious about signing PPP deals since the collapse of the construction company Carillion in early 2018, which foundered after cost overruns on several hospital projects. Until now, the current Labour government has limited PPPs to neighbourhood health centres and projects to decarbonise public buildings, preventing further deals for hospitals and schools. The new towns initiative would mark a broader return.
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.”
