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Some good points!
http://werewolf.co.nz/2019/12/gordon-campbell-on-the-likely-role-of-ppps-in-labours-infrastructural-spending/
And don’t forget in the UK they paid an absolute premium on PPP’s that have ballooned out well beyond what was expected.
“UK PFI debt now stands at over £300bn for projects with an original capital cost of £55bn”
https://www.theguardian.com/commentisfree/2017/aug/30/pfi-britain-hospital-trust-debt-burden-tax
roading
This report: https://image.guim.co.uk/sys-files/Society/documents/2004/11/24/PFI.pdf
found that PPP “contracts are considerably more expensive than the cost of conventional procurement”, resulting in higher returns for the companies running the PPP’s compared to their industry peers.
While hard to compare because of the opaque nature of many contracts and large amounts of subcontracting out, it looked like the actual cost of capital of the PPP’s was 11% compared to Treasure borrowing of 4.5% i.e. 6.5% higher. This is supposed to represent the cost of risk transfer but in practice there was no risk transfer so it’s money for nothing.
“In conclusion, the road projects appear to be costing more than expected as reflected in net present costs that are higher than those identified by the Highways Agency (Haynes and Roden 1999), owing to rising traffic and contract changes. It is, however, impossible to know at this point whether or not VFM (value for money) has been or is indeed likely to be achieved because the expensive element of the service contract relates to maintenance that generally will not be required for many years.”
Overall, for both roads and hospitals they concluded there was no risk transfer and not value for money.
“The net result of all this is that while risk transfer is the central element in justifying VFM and thus PFI, our analysis shows that risk does not appear to have been transferred to the party best able to manage it. Indeed, rather than transferring risk to the private sector, in the case of roads DBFO has created additional costs and risks to the public agency, and to the public sector as a whole, through tax concessions that must increase costs to the taxpayer and/or reduce service provision. In the case of hospitals, PFI has generated extra costs to hospital users, both staff and patients, and to the Treasury through the leakage of the capital charge element in the NHS budget. In both roads and hospitals these costs and risks are neither transparent nor quantifiable. This means that it is impossible to demonstrate whether or not VFM has been, or indeed can be, achieved in these or any other projects.
While the Government’s case rests upon value for money, including the cost of transferring risk, our research suggests that PFI may lead to a loss of benefits in kind and a redistribution of income, from the public to the corporate sector. It has boosted the construction industry, many of whose PFI subsidiaries are now the most profitable parts of their enterprises, and led to a significant expansion of the facilities management sector. But the main beneficiaries are likely to be the financial institutions whose loans are effectively underwritten by the taxpayers, as evidenced by the renegotiation of the Royal Armouries PFI (NAO 2001a).”
Interesting about the PPPs savenz. You have done your homework! Could be good to drop in occasionally to other blogs even if with shorter pieces? And take note of I’m Right when doing future commenting as it appears there is little homework done there.
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