An independent review commissioned by the Labour Party has called for high-level proposals to be drawn up by the end of the year for a new model of public-private partnership (PPP).
The report, produced by the Urban Transport Group (UTG), was led by former Siemens chief executive Jurgen Maier.
It called on the National Infrastructure Council, a Labour Party advisory group, to suggest a new method to attract private investment into major roads and rail schemes.
The report said: ““We recommend that the British Infrastructure Council (BIC) brings together key actors from the public sector and investors to develop a new approach to private finance, including considering the implications on public sector net debt. Its aim should be to report to the Secretary of State for Transport and the Chancellor by the end of 2024.”
The BIC was formed last year while Labour was in opposition, and is made up of industry leaders from Lloyds, HSBC, Santander UK, Phoenix, Fidelity and US firm BlackRock, as well as Mace boss Mark Reynolds.
It currently has no formal role status in government.
The review also called for a new ‘playbook’ to codify a framework that accelerates private investment in transport.
In a statement, transport secretary Louise Haigh said the report would “help inform this new government’s thinking.”
So what does the potentially-influential new report say?
Public-Private Partnerships (PPPs)
One of the central proposals in the report is the expansion of Public-Private Partnerships (PPPs). The report says the government should embrace a more integrated partnership between the public and private sectors, drawing on successful models from Europe and Asia. Such a model could involve combining public sector funding, such as grants and land, with private sector investment, which could include debt and equity financing.
The UTG emphasizes the need for specific conditions, such as strong levels of travel demand along the transport corridor, straightforward project design and engineering, and the ability to generate revenue to recoup private investment. By structuring these partnerships through Special Purpose Vehicles (SPVs), which blend debt and equity, the government can mitigate risks and ensure that projects are delivered on time and within budget.
Capturing indirect economic benefits
The report also pointed to the importance of capturing the indirect economic benefits from transport projects, such as increased land and property values. The report suggests that these benefits can be harnessed to create new revenue streams that can attract private investment.
For instance, the report points to the successful examples of the Northern Line extension to Battersea and London’s Crossrail, where the uplift in business rates directly attributable to the project was used to repay the initial financing. Such models of land value capture need further exploration and standardisation, the report said.
Infrastructure Investment Playbook
A Infrastructure Investment Playbook would be developed by government, devolved authorities, and the private sector and codify a framework that accelerates private investment in transport, the report said. The playbook would set out the approaches and models the government is open to using, clarify the roles of public and private sector actors, and provide guidance to public sector organizations on how to assess their projects’ viability for private financing mechanisms.
The playbook would also align with a transparent project pipeline, which the UTG said is crucial for growing certainty and confidence among private investors.
Long-term certainty
The report underscores the importance of providing certainty to investors and the supply chain. Measures called for included long-term funding strategies and ensuring that transport infrastructure projects are insulated from short-term political changes.
The report advocates for 10-year infrastructure plan, overseen by a the emerging National Infrastructure and Service Transformation Authority (NISTA).
Building local capacity
The report calls for increased support for local authorities, including financial stability, revenue-raising powers, and upskilling in project management and financing. It also suggests formal mechanisms for sharing best practices across local authorities, which would enable them to better leverage private sector expertise.
Fostering innovation and technology
The government should explore the barriers of adopting technologies, such as digital signaling and advanced communication systems to cut costs and improve project delivery times, the report said.
