Building Back Better”: Economic Boost or Private Profiteering?

Kate Bayliss, Ben Bowles and Elisa Van Waeyenberge


Successive governments have attached considerable weight to infrastructure spending. Our current Prime Minister is no exception. But, behind the grand posturing, our investigation into the cultures of expertise that prevail as the infrastructure finance landscape is being redesigned, indicates a contested landscape. Private investors have long been waiting in the side-lines for new investment opportunities. Yet the record of private infrastructure finance is increasingly fraught and multiple government reviews and initiatives have stalled, failing to create a clear way forward.


Against the backdrop of the Covid-19 pandemic, the Prime Minister Boris Johnson announced A New Deal for Britain on 30 June 2020, promising “to tackle the country’s great unresolved challenges of the last three decades”. He set out ambitious plans to build homes, fix the NHS, tackle the skills crisis, etc. and to build back “better, greener, faster”.


The so-called “Project Speed” followed an ambitious Spring Budget which promised large investment in infrastructure, pledging record amounts in roads, railways, broadband, housing and research. In July 2020, the Chancellor added £5 billion Coronavirus “bounce-back” key infrastructure investments. These proclamations follow previous government pledges on infrastructure, including a £600 billion ten-year infrastructure pipeline set out in 2018.


While these announcements evoke images of large spending envelopes on infrastructure, they do not necessarily translate into public expenditure commitments. Indeed, the projections released by the Infrastructure Project Authority (IPA) for infrastructure spending for the 2020/21 financial year refer to up to £37 billion of planned procurements – possibly with a significant proportion to be financed by the private sector. For instance, it includes earmarked private investment in water infrastructure. Indeed, currently, roughly half of the UK’s infrastructure investment (and stock) is privately financed.


Private finance will remain at the heart of UK infrastructure financing, especially in light of the fiscal response to the pandemic. With the public deficit estimated possibly to reach 18 percent of GDP in 20/21, its highest level in over 300 years (excluding periods of war), the Confederation for British Industry captures the mood (p. 5): “While the UK government’s commitment to delivering infrastructure remains undeterred, it is important to note that the country’s fiscal position has substantially worsened as a result of the Covid-19 crisis. In this context, the private sector has a key role to play in helping to bridge the funding gap needed to deliver the government’s infrastructure vision.”

However, the British private infrastructure financing landscape has seen significant disruption over the last few years. For example, late 2018, the Chancellor of the Exchequer announced the end of the Private Finance Initiative and (its short-lived successor) Private Finance 2 for new investments (mainly in social infrastructure) following extensive critique of the model, including its high associated costs. Early 2019 saw the suspension of work at three planned nuclear plants as Japanese companies withdrew from the projects. This followed botched attempts by the government over the last decade to lever international private finance to launch a new nuclear programme, resulting in massive budget overruns and delays at Hinkley Point C – the only new nuclear power station currently under construction. In England’s water sector, high rates of leakage and pollution sit alongside excessive executive pay and shareholder dividends. And in the energy sector, the companies running the transmission and distribution networks have made considerably higher than expected profits. Some services have been taken back into government ownership. Mid-2019, the probation services were renationalised after massive failures of its chaotic part-privatisation in 2015. In June 2018, the East Coast railway line was taken into public ownership (to be joined by the Northern Rail franchise in early 2020 – implying that for the first time since railway privatisation more than 30 years ago, two franchises were in government hands). This preceded de facto nationalisation of the railways as a result of the Covid-19 emergency measures.


Clearly, the private infrastructure financing landscape is facing challenges. Since early 2019, multiple government reviews have been initiated in search for solutions including an infrastructure finance review; an energy white paper; and the Williams review of railways. None of these have, however, as yet offered conclusions or concrete policy direction, and we are still waiting for the long-promised National Infrastructure Strategy.


Through interviews with core stakeholders, we found that infrastructure policymaking is a highly contested terrain, riddled with tensions and contradictions. Our interdisciplinary approach, combining anthropology and political economy, highlights that infrastructure is associated with different meanings and priorities across the parties involved. This has contributed to a lack of clarity in the policy trajectory. For example, UK state agencies (and in particular the UK Treasury and the IPA) remain firmly committed to the centrality of private finance in ostensibly public infrastructure despite the lack of evidence of benefits from private financial involvement. The main underlying driver of support for private finance stems from a hostility to large government debt. Yet private finance is ultimately repaid from user fees and/or taxes thereby creating clear fiscal risks. The regulatory regime remains in a bind mandated to meet the potentially conflicting needs of both investors and end users, while powerful investors seek to resist small regulatory attempts to protect consumer interests. And geopolitical realignments disrupt existing financing trajectories.


The way these tensions are resolved will affect the particular forms that private finance will take going forward. Our investigation draws attention to the multiple economic, financial, political and cultural realities affecting mutations in private infrastructure finance. This understanding of the complexities of private financing is crucial both for the UK and beyond, given the large-scale promotion of private finance in infrastructure across the world as part of the drive to attain the Sustainable Development Goals. Contrary to traditional macro understandings, infrastructure, and the financing thereof, is never politically neutral or simply “technocratic.” Decision-making regarding its policy and practice inevitably promotes some interests over others, with profound distributional consequences.

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