Rachel Reeves ponders private finance to help fund £9bn Lower Thames Crossing

The Treasury is investigating how to attract private finance to bring down the cost of the UK government’s largest planned infrastructure project, the £9bn Lower Thames Crossing.

Rachel Reeves’s department is considering handing over the income from tolls to a private consortium in return for a cash injection that would reduce the cost to the public purse.

It is understood officials are considering a scheme allowing investors into the bidding process to finance some or all of the scheme in return for a lease that could run for 125 years – or even indefinitely – to recoup the outlay.

Reeves has promised to involve the private sector in large infrastructure projects to fill the £22bn hole she identified in government’s finances last month.

The chancellor has rejected reviving the private finance initiative (PFI) which was used by the Blair government to pay for new schools and hospitals, typically over 30 years, but became associated with costly and inflexible contracts.

Bringing back the Conservatives’ reformed version of PFI, known as PF2, is also seen as unsuitable by advisers to Reeves. Both PFI and PF2 contracts were abolished for new projects in 2018 after the collapse of the construction company Carillion.

A straightforward investment contract that guarantees a return over a longer period, but leaves the commissioning and building of the tunnel in place, could be a more attractive option.

The Lower Thames Crossing has been planned for more than 10 years to create a relief road under the river for the M25, running east of the Dartford Crossing.

After the cancellation of the second leg of HS2 between Birmingham and Manchester, it remains the largest infrastructure project in England. An expected cost of £9bn is likely to have grown considerably since the budget was last calculated during the pandemic and before a 20% cumulative increase in inflation.

National Highways, which looks after England’s major roads, put forward the scheme after it said the Dartford Crossing was overwhelmed with traffic using London’s orbital road and lorries driven from the ports of Dover and Folkestone to destinations north of the capital.

Environmental campaigners have argued that National Highways’ own figures show the new tunnel will be over capacity within a few years and undermine attempts to lower carbon emissions. They argue that more sustainable solution would be to reroute container lorries to ports further up the coast or increase the capacity of the rail network.

The transport secretary, Louise Haigh, has commissioned an internal review of capital spending by her department using “external expertise” to judge which projects move forward.

The government has already halted a scheme to tunnel beside Stonehenge to widen the A303 and is expected to cull many more projects to save money.

A Treasury spokesperson said: “The government retired PFI and PF2 models in 2018, and there has been no change to this policy.

“The government is committed to harnessing private investment and restoring growth, and will work in partnership with the private sector to deliver its missions.”