LABOUR are reportedly planning to use a private finance scheme to fund a £9 billion infrastructure project in England – in a bid to keep costs off Government books.
Chancellor Rachel Reeves is said to be considering a plan which will allow whichever contractor wins the award to build the Lower Thames Crossing to profit from tolls on the bridge and tunnel.
The Treasury has insisted it would not mark a return to the burdensome private finance initiative (PFI) deals which became albatrosses for the last Labour government, the Financial Times reports.
Sources told the paper the project, which will link Kent and Essex, could be funded in the same way that new water projects are, using the regulated asset-based model.
Unlike PFI contracts where investors were guaranteed payouts from state coffers, backers in regulated asset-based projects are rewarded through a cut in charges from the public, in this case tolls.
Construction giant Balfour Beatty are said to be interested in the project, with chief executive Leo Quinn saying on Thursday he “would love to use our expertise”, according to Construction News.
He said: “We would love to use our expertise in PPP [public-private partnerships]. I don’t think it will ever be called PPP [again], it will come in another form, but we would love to use to expand into the right opportunities.
“The challenge is how they would want to bring it to market, because the old PPP was a fairly expensive way to fund infrastructure so they may be looking at a different financial model. I can’t comment because I don’t know the detail on it.”
Balfour Beatty did well under the previous PFI regime and Construction News said the firm still held a portfolio of investments including the company used to maintain and upgrade the M25.
WSP, a multinational construction consultancy firm, welcomed private investment in public infrastructure and said it would “continue to be a prominent feature” in how the UK funds such projects.
Derek Sharkey, WSP’s strategic growth lead, told specialist news site New Civil Engineer: “What is evident, is that in a world in which investors, contractors and operators are being increasingly held to account during the operational phase, the public sector has mechanisms in place to reduce their payments burden where parties are underperforming.
“This is not forgetting the risk transfer to the private sector, particularly on megaprojects of this scale and the excellent condition in which these projects are handed back to the public sector following expiry.”
A Treasury spokesperson ruled out a return to PFI, which was buried in 2018 by then-chancellor Philip Hammond after the Carillion disaster.
But they added: "The Government is committed to harnessing private investment and restoring growth and will work in partnership with the private sector to deliver its missions.”
