Secrecy and concealed borrowing protect commercial rather than public interests
Public-private partnerships (PPPs) have come back into fashion. Not only in the UK – already this year Birmingham young people’s mental health services have been passed to a PPP – but globally, with G20 and OECD negotiations planned that could see privatisation become official UN policy.
Today a report by the Public Services Research Institute (CSI) concludes that there are slim grounds for this zeal, and that PPPs are an expensive and inefficient way of financing public services and infrastructure.
‘Why Public-Private Partnerships don’t work’ examines how PPP processes lack transparency, hiding behind confidential negotiations to protect commercial advantages. They also conceal public borrowing and provide long-term state guarantees for profits to private companies. The result is that, rather than making the provision of services to the public their first priority, these kinds of contracts have to ensure everything they do protects corporate profits.
Rosa Pavanelli, general secretary of Public Services International (PSI) says:
“Governments and the UN are heavily influenced by a powerful lobby of the biggest services, financial, consulting and law firms, all intent on reaping profits from basic public services such as health, water, energy.
“We must remember that private sector corporations need to maximise profits if they are to survive. This is incompatible with ensuring universal access to quality public services, especially for those unable to pay these profits.”
Report author David Hall, who was director of PSIRU, has analysed and compared various cases and countries where PPPs have not delivered what they promised, including the failed programme of Transport for London, the poor performance of the airport of Delhi and the financial troubles with the Troika PPP package that was imposed on Portugal. He says:
“The United Kingdom has used PPPs for a wide range of buildings and infrastructure – hospitals, schools, roads, rail, defence, and government offices. As neoliberal limits on government borrowing spread, so did PPPs – like in Europe, where EU rules started to limit government borrowing to three per cent of GDP.”
New Zealand, Australia, Canada and the USA all began using PPPs as a way to balance budgets by concealing borrowing, to shrink the size of governments and to reward corporate backers.
The report suggests alternatives to PPPs, in which national and local governments continue to develop infrastructure by using public finance for investment, and public organisations to deliver the service. This way the public sector gains in efficiency, because of reduced transaction costs and contract uncertainty, and also gains in democratic accountability.
Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter
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