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.