JOHN QUIGGIN. Public Private Partnerships. The mirage.

In the UK Budget last week, the  Chancellor, Phillip Hammond announced the end of the PF2 scheme, the Conservative government’s replacement for the discredited Public Finance Initiative originally introduced by the Conservatives under John Major, but greatly expanded  by Tony Blair’s New Labour.  This announcement is less than meets the eye in a couple of respects. Financing under PF2 had already slowed to a trickle.

(The NSW Government should read this to understand what has gone wrong with the PPP venture at the Northern Beaches Hospital…..John Menadue)

More importantly, the UK government still hasn’t given up on the mirage of Public Private Partnerships, and may simply be trying to forestall more drastic action by a future Labour government.

Nevertheless, it’s a significant move. PPPs, in their various forms are an archetypal neoliberal policy, designed to show that capitalism can deliver all the infrastructure services traditionally associated with the social democratic state, while shrinking the public sector and keeping financial markets firmly in control.  The failure of the PPP system in its country of origin ought to alert its imitators here that the model is irreparably broken.

Having abandoned the PFI, it now seems likely that the government will try something called the Non-Profit Distributing (‘NPD’) Model. As this article makes clear, it’s essentially an expensive form of debt finance with various cosmetic adjustments designed to keep the debt off the balance sheet. So far, these attempts have proved unsuccessful – auditors understand that if the public sector takes the risk, it owns the asset and owes the associated debt. In fact, the author of the piece, written in 2014, concludes that the authorities in question should go with the PF2.


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3 Responses to JOHN QUIGGIN. Public Private Partnerships. The mirage.

  1. Dave Irving says:

    I think the new Royal Adelaide Hospital was built under some sort of PPP by the Labor government (now in opposition). The new Liberal government are doing something that looks suspiciously like privatisation.

  2. Hans Rijsdijk says:

    Current governments are so blighted by ideology that practical and non-ideological arguments often don’t even register. And while we see this particularly with LNP governments it is clear that the Labor party is also not immune against ideology.
    It can only be for ideological reasons that governments keep pursuing these PPP arrangements (they are always backed by the business sector as there are big profits to be made usually at the expense of the public purse) but there are already many examples in Australia where the PPP spectacularly failed. Couple this with the inability of the Public Service to manage large projects effectively and you see the disastrous results all around (for example the Light Rail project).

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