New public private partnerships (PPP) to fund infrastructure will only be considered where schemes have identifiable revenue streams, with a handful of exceptions, the government has announced.
The long-awaited 10-year £725bn infrastructure strategy, which lays out plans to boost economic growth and upgrade rail and road services, said infrastructure funding would increasingly be shaped by a more diverse mix of finance models, including regulated asset base (RAB) agreements and availability-based contracts.
Regarding the role of private funding in the infrastructure strategy, chief secretary to the Treasury Darren Jones told Construction News: “We are more open to having those conversations with private investors.”
The RAB model is already in use on major schemes such as Sizewell C and the Thames Tideway Tunnel, and is now under consideration for the Lower Thames Crossing.
The strategy said the government would also explore use of Contracts for Difference and cap-and-floor models for emerging technologies including long-duration energy storage and hydrogen transport networks.
New PPPs will only be considered where schemes have identifiable revenue streams and where risk can be appropriately transferred and value for money assured.
However, the PPP option is being considered for select health facilities and estate decarbonisation schemes, including solar and low-carbon heating, with a decision due by the Autumn Budget.
Jones told CN: “There’s a little section in [the infrastructure strategy] which says that we’re going to do a little piece of extra work, which will come out at the Budget in the autumn, to look at the potential role of private capital, but in very specific use cases for social infrastructure.”
Jones announced at least £9bn will be allocated over the next two years to address the critical maintenance needs of health, education and justice estates, rising to over £10bn per year by 2034/35.
While the infrastructure strategy will include the “megaprojects” of HS2 and Sizewell C, the focus on maintenance will be key, given it had been “deprioritised for such a long period of time”, Jones said.
“A lot of our public infrastructure has been left crumbling and undermaintained, and that’s a real problem for people. So, we’ve made headline commitments on maintenance today.”
Overseeing much of the strategy will be a new government body, the National Infrastructure and Service Transformation Authority (NISTA), aimed at reducing delays and overspends.
“NISTA has been given a strategic authority that is broader than the founding components of the NIC and the IPA and it’s hardwired alongside our spending teams in the Treasury,” Jones said.
“It’s kind of a centre of expertise that advises us on whether to go or no go on spending approval for projects, while also continuing that assurance work, but the key test for it is that it’s supposed to be a centre of expertise that is enabling and helping departments to be better at delivering their infrastructure and major project priorities.
“We will stop funding projects that are failing.”
The government’s thinking is that the infrastructure strategy will create the degree of “certainty and stability” needed to attract investment and will boost supply chains and jobs across the UK.
Becky Wood, chief executive of NISTA, said: “This investment will help us to address some of the challenges that our key public services have faced over recent years.
“Strategic preventative maintenance based on longer-term plans is a more effective approach than making decisions in the absence of certainty about the future – and will ensure our vital public services remain resilient and fit for purpose.
“By approaching replacement and maintenance of our infrastructure in an informed and systematic way, we can target interventions effectively and plan properly for the future.”
Jones also announced that a new online procurement portal will be launched in July to give contractors real-time announcements of contracts and to boost confidence in the pipeline.
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Matthew Davies