Paying for Public Projects: alternative sources roundtable

While options such as institutional investment, public or private loans, GLA or MHCLG funding, and Section 106 are widely known and used to pay for public projects, several alternative sources are coming onto the radar. Varying in scope – from small-scale to multi-million-pound investments – these sources could be viable complements or substitutes to traditional sources.

In the final Paying for Public Projects roundtable, Future of London convened senior practitioners to discuss ‘alternative’ sources: public or private in origin, but lesser-used or lesser-considered options in London (and broadly in the UK) than those discussed in previous roundtables. Examples of such sources are below, along with a Chatham House summary of key discussion points.

What are the options?

This list isn’t exhaustive, but presents options already somewhat used or with potential for greater uptake.

  • Responsible investment: a general term for investment in organisations/projects with positive social or environmental impacts (social or impact investing), or avoiding investment in socially/environmentally damaging schemes (ethical investing)
  • Municipal bonds: bonds issued by cities to raise money for projects; bond holders (investors) lend money to the city and receive repayments with interest over time
  • Green bonds: bonds issued specifically for environmental projects
  • Islamic finance: as investment in line with Sharia law, Islamic finance cannot charge interest. Instead, banks use different arrangements, e.g. purchasing assets and reselling or leasing back to buyers; working in partnership with clients to share risk and profit.
  • Strategic Investment Fund: GLA initiative to use its share of London business rates to create a £112m fund for key projects
  • Business rates retention pilot: central government initiative to allow some local authorities to retain 100% of growth in business rates revenue
  • Ongoing Section 106: where usually Section 106 payments are one-off, some arrangements provide ongoing contributions for a fixed period
  • Peer-to-peer lending: in this case, boroughs lending to one another
  • Crowdfunding: money raised from individuals or organisations through online platforms to fund projects, sometimes match funded by a public body, including built environment schemes and social initiatives (e.g. Crowdfund London)
  • Tourist tax: low charge levied at visitors through accommodation, tours, entrance fees etc
  • Lottery funding: money raised from public lotteries e.g. National Lottery
  • Philanthropy: donations from high-wealth individuals or organisations
  • Cryptocurrency: digital currencies, many of which are based on blockchain (a decentralised database/ledger in which all transactions are recorded, accessible and uneditable – and therefore seen as transparent and secure)


The roundtable and recent news/publications suggest some overall trends:

  • Although there are a lot of alternative sources on the menu, public finance innovation has been incremental rather than radical [PDF].
  • Some ‘alternative’ sources are just new ways of using existing sources, e.g. ongoing Section 106 contributions instead of one-offs, GLA redistribution of business rates.
  • The Public Works Loan Board (PWLB) interest rate increase has many local authorities looking elsewhere for affordable finance. One survey from Oct 2019 found the most popular alternative is to borrow from other local authorities, and that interest in borrowing from the UK Municipal Bonds agency has grown.
  • Crowdfunding is among the more widespread sources, but to date has been used by local organisations to raise funds for grassroots projects – not by local authorities to raise funds for services or development.

What are the challenges and barriers to uptake?


An implication of ‘alternative’ sources is they aren’t as widely used or known as mainstream options. Green bonds are gaining traction with other national governments, but the UK government has been slower on the uptake, leaving it to city-level organisations like Transport for London and Swindon Borough Council to test the waters.

Lack of precedent is especially the case with municipal bonds, which are widespread in the United States but few and far between in the UK. The UK Municipal Bonds Agency, set up in 2014 to offer another low-rate borrowing option for local authorities, hasn’t actually issued any bonds. This could change post-PWLB rate hike and post-Brexit. Stronger support and guidance from central government – and sharing successful examples where they have been used – could encourage further use.

Islamic banks are also on the fringes of London financing, at least in terms of the number of visible projects – actual amounts invested have been significant, supporting major schemes like Vauxhall/Nine Elms/Battersea, the Shard, and the Olympic Athlete’s Village.

Finally, although Community Infrastructure Levy is not ‘alternative’ (all local authorities can apply it and it’s widely collected), participants pointed out – as in the first roundtable – that a lack of precedent or framework for how to spend CIL is causing some boroughs to amass large unspent income.


Roundtable participants pointed out that medium-sized projects in particular can fall into a financing gap: too small for big pots of central government funding and institutional investment (which tend to operate in the £50m+ range); too big for Section 106 contributions or revenue from council assets. Scaling up some of the ‘alternative’ sources to cover major schemes is a challenge, but they are useful leverage to attract additional money.

For example, one local authority receives £1m per year in ongoing Section 106 contributions associated with a major tourist attraction. The revenue goes into an account and leverages additional contributions from the surrounding Business Improvement District. The BID, council, and attraction operator work together to distribute the money locally, covering services like security and maintaining public realm and parks.

Another respondent noted that although community lotteries bring in relatively small amounts, councils have full control over it, and it can make all the difference to a project in attracting more funds.

When it comes to business rates retention, participants noted that inner London boroughs, with higher concentrations of businesses, will benefit more than lower-density outer London, compounding existing imbalances across the city.


Previous roundtables highlighted a lack of commercial skills within public organisations as preventing more effective financing and funding efforts, which is only compounded with the unfamiliarity of many fringe sources.

Different sources of money also come with different requirements – in terms of what goes into a bid and what is expected to be delivered – adding further constraints. Consistent evaluation would simplify bidding processes.

As in other roundtables, the issue of public sector salaries being unable to attract private sector talent came up. One participant suggested rethinking salary hierarchies: “Certain skills command a premium: a chief executive doesn’t need to be the most highly paid person in the organisation.”

Where next?

Beyond significant central government initiatives such as further devolution and major tax system reform, the roundtable generated ideas feasible at the borough and pan-London level:

  • Joint hires with commercial skills could work across boroughs to provide expertise and upskill teams – while working in the interests of the public sector.
  • A tourism tax for London could fund small/medium projects. For example, one participant had analysed a central London public park that attracts 8m visitors and costs around £500k per year to maintain, which would benefit from tourist tax proceeds.
  • Given growing interest in climate change and social value, responsible investment could start to form a larger proportion of finance. One participant suggested councils should use their purchasing power to be more ruthless about favouring providers who demonstrate carbon neutrality.
  • While not discussed in the roundtable, municipal cryptocurrencies could step in where cuts to traditional sources threaten to squeeze services and project delivery. For example, Berkeley, California [1,2,3] is setting up a cryptocurrency municipal bond, in which residents can invest to help finance affordable housing, public realm, and other services.

In early 2020, Future of London will publish a briefing to bring together findings from this and previous roundtables. If you have thoughts to feed in on London’s current funding/financing landscape – or new or innovative sources we should be watching for on the horizon – contact



Thank you to our participants:

Paul Augarde, Director of Placemaking, Poplar HARCA
Gemma Bourne, Investment Director, Big Society Capital
Lorena Farias, Director, TrustBlock
Owain Jones, Head of Area Regeneration for Waterloo & Streatham, LB Lambeth
Nicola Mathers, Chief Executive, Future of London
Paul Munday, CEO, Funding Affordable Homes Housing Association
Anthony van Hoffen, Partner, Lewis Silkin
Jenny Rydon, Partner, Development & Valuation Consultancy, Montagu Evans
Andrew Sivess, Head of Financial Transactions, Greater London Authority
Javin Solanki, Assistant Finance Director, Poplar HARCA
Adam Swersky, Councillor & Cabinet member for Finance & Resources, LB Harrow
Lisa Taylor, Executive Director, Future of London (moderator)
Luke Webster, Chief Investment Officer, Greater London Authority
Kevin White, Partner, Montagu Evans