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Ministers have announced plans to sign more partnerships with the private sector for the delivery of UK public services including health and education, despite criticism of the Blair government’s controversial “PFI” schemes.
In a new 10-year infrastructure strategy published on Thursday, the UK government said it wanted to “evolve our infrastructure finance models” including exploring the use of public private partnerships (PPPs) for projects such as redeveloping Euston station and building the Lower Thames Crossing.
The government also said it would explore the use of PPP for taxpayer-funded projects, for example in certain types of healthcare, “in very limited circumstances where they could represent value for money”.
Darren Jones, chief secretary to the Treasury, said the government would look at “very targeted potential applications of private capital to social infrastructure”.
NHS England has already started work on a new model to draw in private finance to pay for health infrastructure, using what its leadership calls an “off-balance sheet capital investment mechanism”.
Chancellor Rachel Reeves has changed her fiscal rules to unlock £113bn of extra public sector capital spending this parliament — funded through borrowing — but she is also keen to attract private investment for infrastructure projects.
“PPPs will be considered for projects and sectors where there is a revenue stream and appropriate risk-transfer can be achieved,” the government said on Thursday.
The Private Finance Initiative (PFI) model used by the last Labour government in the 2000s has been hugely controversial as a means of financing UK infrastructure projects.
The Conservatives banned PFI for central government projects in 2018 after the National Audit Office declared them poor value for taxpayers.
Government figures privately insisted, however, that any new PPP models would be drawn up differently, to avoid the problems of the PFI era. Hundreds of PFI projects from this period are still mired in legal disputes between government and private investors.
Lord Hutton, the former cabinet minister who now chairs the Association of Infrastructure Investors in Public Private Partnerships, (AIIP) said the commitment to a new wave of PPPs to build and maintain schools, hospitals and public infrastructure was “welcome and long overdue”.
But Paul Nowak, general secretary of the Trades Union Congress, said: “Crucially, we must learn from past mistakes — avoiding the burden of wasteful PFI deals that have left taxpayers footing the bill for years to come.”
Ministers claimed on Thursday that the government would pump more money into the maintenance of hospitals, schools and courts as part of the new infrastructure strategy. They have pledged £9bn this year for the “renewal of health, education and justice estates” to tackle a “soaring maintenance backlog”, rising to £10bn a year in 10 years’ time.
That £10bn figure includes £6bn for the NHS, £3bn for schools and colleges and £600mn for prisons and courts.
However the government was unable to say what the equivalent figures were for the last financial year.
Jones said the maintenance backlog in the public estate was now estimated at more than £49bn, claiming the previous Tory government had cut capital investment.
But Richard Fuller, shadow chief secretary to the Treasury, challenged Labour’s claims, saying that capital expenditure under the last Conservative government increased from £81.7bn in 2019/20 to £117.8bn last year. The equivalent figure for this year is £129.1bn.
The broader infrastructure strategy promised £725bn in long-term funding for maintenance and major projects over the next decade, including £1bn to improve roads, £590mn towards building the Lower Thames Crossing, and £16bn to establish a new, publicly owned National Housing Bank.
Ministers said there would be “vital reforms” to ensure a more joined-up approach to planning and delivery of these projects. Labour has set up a new “National Infrastructure and Service Transformation Authority” (NISTA) through a merger of two existing infrastructure quangos.