PPPs, they just don’t work June 1, 2007Posted by franklittle in Economics, Irish Election 2007, Irish Labour Party, Irish Politics, Sinn Féin, Taxation Policy.
A couple of days ago, having wandered into Andersonstown News publisher Mairtín Ó Muilleoir’s blog following a rightly critical analysis of his review of the election on the inimitable Splintered Sunrise, I left a comment disagreeing with his analysis. His latest post, which I saw when I went back to see if there was a reply, seems to suggest that Sinn Féin in the South should drop it’s objections to PPPs. If that is a misunderstanding, I apologise, but that’s the sense I got.
A positive reference to PPPs is, for me, like waving red rags at the running of the bulls.
Public Private Partnerships do not work. Let’s for a moment leave aside the traditional, and by no means invalid, left criticism of them. That they transfer unionised public sector workers into un-unionised and often abused private sector workers. That they transfer control of community facilities to for-profit companies who refuse to allow the community to use them for purposes other than that for which they were built, like schools for example being closed to residents meetings. That construction is often shoddy and getting repairs and cleaning done often extremely difficult leaving children with poor facilities ion a state of disrepair.
Look at it simply from a value for money point of view. Two examples. The first in education. The Comptroller & Auditor General has exposed the fact that PPPs are more expensive than normal state construction. This is because not only can the state borrow for capital investment at a better rate than business, but the state does not need a profit margin.
The building of schools under PPP in the South was estimated by the Department to cost 6% less than under normal procurement. The C&AG’s report in 2004, found they will cost between 8% and 15% MORE than under normal procurement.
So the only argument put in favour of PPPs, that they save the state money and off-load risk to the private sector is a nonsense.
But wait a minute, maybe it’s an isolated case. Maybe elsewhere PPPs are functioning perfectly. Well, let’s take road-building. Here’s a good example in road-building from the Irish Independent. One section of the Dublin to Galway motorway was built by the state. Another section of it was built under Public Private Partnership. Cost of the state built section worked out at 8.1 million Euros per kilometre. Cost of the PPP built section worked out at 14.1 millioon Euros per kilometre. The PPP section, by the way, will have a toll on it for almost three decades, up to 2035 so the taxpayer gets to pay again, and again, and again.
Bear in mind as well that not taken into account there is the fact that the company with the PPP contract can write off it’s construction costs against it’s Corporation Tax liability, something Labour’s Joan Burton rightly went ballistic over.
Dr Eoin Reeves, senior lecturer in Economics at University of Limerick and director of their PPP and privatisation research group has described the use of PPPs in Ireland as completely unjustified and warned against them as far back as 2001.
In an 11 page special analysis of the Private Finance Initiative in Britain completed shortly before he died, investigative journalist Paul Foot summed up the system saying:
“In every area where it has been adopted it has cost more, and will go on costing more. The PFI hysteria in the Labour Government led to an enormous transfer of power in Britain: from public, elected authorities to private, unelected corporations.”
Regrettably, it’s not on the internet, but this piece he wrote for the Guardian, although a few years old, gives a taster.
Ó Mulleoir’s argument seems to be that since McGuinness did it in the North, Shinners in the South should be prepared to do it. To be honest, I have some sympathy with McGuinness’s problem because the Executive has neither borrowing nor tax-raising power, but for a government in the South to even contemplate using PPP is little short of madness.
It is more expensive than state procurement; it amounts to a subsidy of the private sector by the taxpayer; it undermines public control of our capital infrastructure and it eliminates facilities used by communities.
PPPs, they just don’t work boys and girls.