Handing vital infrastructure to private investment companies will generate windfalls for investors and leave the rest of us worse off. We need a better plan

Daniela Gabor is professor of economics and macrofinance at UWE Bristol

The Labour party has a plan for returning to power: it will get BlackRock to rebuild Britain. Its reasoning is straightforward. A cash-strapped government that wants to avoid tax increases or austerity has no choice but to partner with big finance, attracting private investment to rebuild the infrastructure that is crumbling after years of Tory underinvestment. Labour has already done the arithmetic: to mobilise £3 of private capital from institutional investors, you need to offer them £1 in public subsidies. But every time you hear Labour announce such an infrastructure partnership, think of the hidden politics. BlackRock will privatise Britain – our housing, education, health, nature and green energy – with our taxpayer money as sweetener.

BlackRock has long peddled the idea of public-private partnerships for infrastructure, climate and development. Yet its political momentum has recently accelerated. When its chair, Larry Fink, the world’s most powerful financier, sat with world leaders at the G7 summit last month, he promised the following: rich countries need growth, infrastructure investment can deliver that growth, but public debt is too high for the state alone to invest the estimated $75tn (£59tn) necessary by 2040. Trillions, however, are available to asset managers who look after our pensions and insurance contributions (BlackRock, the largest of these firms, manages about $10tn, as a shrinking welfare state pushes us – future pensioners – into its arms).

If governments work with big finance, Fink explained, they can unlock these trillions. But to do so, they will need to mint public infrastructure into investable assets that can generate steady returns for investors. Why does BlackRock need the state? Why can’t it deploy trillions without the government’s helping hand? The British public remembers all too well PFIs, the private finance initiatives through which the state ended up paying extortionate amounts to private contractors that designed, built, financed or operated public services such as prisons, schools and hospitals before handing them back to the state, often in poor condition.

But for big finance, there is more now at stake. In this golden age of infrastructure, financiers plan to own our infrastructure outright and transform it into a source of steady revenue. Since buying Global Infrastructure Partners in January 2024, BlackRock holds about $150bn in infrastructure assets, including US renewable energy companies, wastewater services in France and airports in England and Australia. It plans to expand aggressively, just like other private infrastructure funds. Direct ownership is the main game, but not the only one. Big finance can also invest in infrastructure indirectly, by lending to private infrastructure companies. The key is returns. For this, BlackRock wants the state to “derisk” investments. This financial jargon was included in the 2024 Labour manifesto, and it in essence involves the state stepping in to improve the returns on infrastructure assets.

https://www.theguardian.com/commentisfree/article/2024/jul/02/labour-plans-britain-private-finance-blackrock