MEDIAWATCH: Simon Wilson’s critique of PPPs is essential reading

Simon Wilson reminds us all why he’ll be the first to get sacked the second the new alt-Right Billionaire Culture War Monger takes over with a blistering appraisal of PPPs…

Road tolls, PPPs and the Investment Summit: Time for some honesty – Simon Wilson

Whether it’s the Government or the private sector borrowing to pay for a project, taxpayers will have to pay that money back.

As Infrastructure Minister Chris Bishop told another conference just yesterday, “PPPs are not magic money. It’s not free. It’s just a procurement method.”

The Government can borrow money more cheaply than anyone else. It’s paying 4.7% interest on 10-year Treasury bonds right now, while the private sector is paying upwards of 8%.

Largely because of this disparity, a British parliamentary study in 2011 found PPPs were likely to end up costing twice as much as other comparable projects.

The advantage to the Government is that the higher price doesn’t have to be paid for 20, 30 or even 50 years. It becomes your children’s problem, when the politicians who made it so are no longer around to answer for it.

Bishop told the conference yesterday that his Government will use PPPs “only if they are the same price or cheaper over the whole life of the project”.

That’s pretty interesting, because the evidence this is possible, like the money itself, is not falling out of the trees.

…that’s right! THEY ARE NOT CHEAPER…

As a rule of thumb, the more a PPP requires a private company to take on the risks of a project, the higher the price will be. The company must cost those risks into its contract or it won’t take on the work.

This also pushes up the price we pay, but it still doesn’t remove the risk.

As Craig Renney, from the Council of Trade Unions (CTU), has noted, often the risk isn’t settled by a PPP. “Instead,” he says, “what you get is ‘risk ignorance’. No one actually knows where real risk lies until you end up in court.”

…once the corporation know the Government is on the hook, any budget blow out becomes acceptable for them…

Yesterday, Bishop said New Zealand is the fourth-worst country in the OECD at maintaining its infrastructure assets.

“The great advantage of the PPP model,” he said, “is that you can lock in the maintenance over 25-30 years and make them do it. You have to pay for that, of course, but the work gets done.”

But potholes and rotting hospital buildings are not caused by an absence of PPPs. They’re the direct consequence of Governments abandoning maintenance in favour of paying down debt.

And it doesn’t follow that PPP contractors will necessarily do it better. Their priority is to make a profit and if that means manipulating the contract to avoid ongoing commitments, who’s to say they won’t do it?

PPPs are not a guarantee of whole-of-life maintenance – proper funding, good contracts and good regulations are.

Perhaps there are PPPs that will make good sense for us, as taxpayers and/or as users of the new infrastructure. But public debt in this country is relatively low and the credit-rating agencies say the Crown could borrow tens of billions more. We don’t have to be beggars.

…exactly.

Public private Partnership is an expensive trick Governments use to look lime they are upgrading infrastructure when really it’s just Corporate Welfare!

The Private Public Partnership model is deeply flawed…

Campaign groups, economists and unions have come out against the government’s drive for Public Private Partnerships (PPPs), calling them short-sighted, inefficient and expensive.

“Farming out infrastructure development to the private sector lumps substantial costs onto taxpayers, both for funding exorbitant private sector profits, as well as the more expensive cost of private sector borrowing,” said Edward Miller, Researcher at the Centre for International Corporate Tax Accountability and Research.

“Infrastructure investors are already lining up for handouts like concessionary tax rates and greater scope to artificially reduce taxable profits. The experience in letting the private sector run our electricity generation sector has shown that cash for shareholders consistently trumps investment in new generating infrastructure for Kiwi households and businesses,” said Miller.

“There is no financial case for PPP’s in New Zealand where the Crown can borrow more cheaply”, said CTU Economist Craig Renney. “The Government’s own PPP guidelines state that. We shouldn’t be handing profits to overseas financiers when it comes to building the schools, hospitals, and essential public services Aotearoa needs. We will all pay more in the long-run.”

Grace Newton, from campaigning group ActionStation added; “there is a much cheaper way of building what we need, and that is to finance infrastructure ourselves – rather than pay rent to an asset management company who doesn’t even pay domestic tax. PPPs mean we end up paying more for a slower job, with far less checks and balances, let alone future proofing..”

“If we consider that the economic argument doesn’t stand up for PPPs, and they are in fact reckless, then we need to question why this government is pursuing them – and can assume that it is ideological,” says Newton.

“This would track with similar decisions from the coalition – such the corporatisation of our school lunch programme, moves to privatise our healthcare system, and the stopping of hundreds of state housing developments to make way for the private market. This is despite 72% of New Zealanders thinking that the government should be building state housing at scale – showing that the public appetite is for well-funded services, not privatisation.

“When public services and infrastructure are handed over to private companies, we all lose – it ultimately leads to corporate profits rising while we’re left paying more for lower-quality services”, said Newton.

…PPPs are a joke and we are seeing how they impact our School Lunch programme perfectly…

…What we need is to bring back the Ministry of Works to build our own infrastructure and Max Harris has done an amazing amount of work on this idea…

Rising To The Challenge: A Ministry Of Green Works For Aotearoa

Two of the biggest crises of our times – housing and climate change – could be the target of a new Ministry of Green Works that would integrate important responsibilities related to safeguarding Aotearoa’s future, according to a report released today by FIRST Union.

A Ministry of Green Works for Aotearoa New Zealand: An Ambitious Approach to Housing, Infrastructure, and Climate Change is a policy report commissioned by FIRST Union from co-authors Max Harris and Jacqueline Paul that considers Aotearoa’s systemic infrastructural problems and how they could be addressed by a new governmental entity that builds on the former Ministry of Works and integrates several key departmental responsibilities to future-proof the country for significant challenges to come.

“From our experience in workplaces, we know that contracting is a broken model that has driven down wages and led to massive inefficiencies in construction and infrastructure,” said Jared Abbott, FIRST Union Secretary for Transport, Logistics and Manufacturing.

“As the report describes, the private sector doesn’t have the capacity to deliver on large-scale housing projects and inevitably there are now worker shortages due to poor conditions in the sector.”

“Finally there is insufficient coordination to tackle climate change under the current model – the public sector has limited powers to ensure green building standards in housing and infrastructure, and it’s not equipped to respond to other unexpected challenges, like quickly building managed isolation facilities, for example.”

The report argues that the right response to these problems will be consistent with seven values: honouring Te Tiriti o Waitangi; manaaki whenua, manaaki tangata; Indigenous innovation; collaboration and coordination; creativity; safety and accessibility; and transformation of our economic model. The authors note that any new Ministry of Green Works must learn from its historic namesake and considers twelve risks related to its establishment.

The report contains feedback and interviews with experts including Ganesh Nana, John Tookey, Rosslyn Noonan, Len Cook, Andre Brett, Matthew Scobie, Syd Keepa, Judith Aitken, Susan Krumdieck, Alexis Harris, Murray Parrish, Jen McArthur, Troy Brockbank, Brendon Harre, Joe Gallagher, Ben Schrader, James Muir, Patrick Cummuskey, Andre de Groot, Ben Ross, Huhana Hickey and Nick Collins.

The report is being launched as the 2021 United Nations Climate Change Conference (COP26) begins in the United Kingdom over the upcoming weekend.

“Even with our best intentions to fix our housing, infrastructure and climate problems individually, we will miss the boat if we don’t consider their interrelatedness and set firm goals that integrate core functions of all agencies – this is where a Ministry of Green Works comes in,” said Mr Abbott.

“When the last Ministry of Works was cut up and sold off during the extreme ‘reforms’ of the 80s, we ended up a decade later with the leaky homes scandal and a lot of pressing questions – we can’t afford to wait for the consequences of climate change to set in before we act.”

…we have better solutions and we need a bigger State.

It is time to go beyond the neoliberal 30% GDP debt straitjacket and build a new State to build the infrastructure that a allows adaptation and resilience.

Bernard Hickey argues that even if we agree to the neoliberal Wellington Consensus of 30% GDP debt, we could still borrow $60Billion and remain within that absurd ideological economic straight jacket so where should that $60billion be spent on resilience and adaptation?

We need future proofing ideas, we need a Ministry of Works to do it, we need big ideas and we need big new taxes to fund those big ideas, we need to build in self sufficiency, we need mitigation and adaptation.

Unlike Covid, whose worst was avoided, this climate change damage is real world and physical. The magnitude of what is required from the State politically resets National and ACT’s small Government agenda.

No one wants to hear about amputating the State when they are running to the State for protection.

This was the exact same mistake the Right made last time with Covid.

The Rights usual slash and burn of the State simply isn’t sustainable in face of how invested the State is going to have to be in the rebuild.

PPPs are not a solution, taxing the 14 Billionaires and 3000 families who have over $50million each alongside the banks is a solution.

 

 

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