The financialisation of public infrastructure was discussed in Part 1. It reinforces the need to assess the PPP model, the sale of PPP equity and growth of the secondary market in the context of financialisation, personalisation, marketisation and privatisation (Whitfield, 2012). The sale of equity is only one manifestation of PPPs. PPP vested interests have traditionally tried to limit discussion to a project or sector basis to try to avoid examining the model as a whole. The evidence in the ESSU database and this report should be used to address the wider agenda and must not focus on identifying winners and losers in specific projects.
A critical analysis of the public costs and impacts of PPPs is summarised in Table 25. Ultimately, the negative effects of the PPP secondary market can only be solved by the termination of the PPP programme and replacement with a public investment programme with new regulatory controls on existing PPP projects.
PF2 will further embed the secondary market. The solution lies in terminating this model, not in minor amendments that serve to make it more attractive to private capital.
Table 25: The case against PPPs and privatisation
Public benefits | |||
1 | Construction companies reduce delays and cost overruns | 4 | Construction companies proactive in introducing green building systems |
2 | Whole life costing to take account of maintenance and renewal. | 5 | Corporate-wide approach of ICT to improve access and efficiency. |
3 | Higher degree of price certainty. | 6 | National building programmes for schools, colleges and health centres. |
Public costs and impacts | |||
1 | Higher cost of private borrowing | 14 | Sale of PPP equity ramps up profits and rate of return |
2 | Does not significantly increase investment in infrastructure | 15 | Complexity leads to increased use of consultants with high transaction costs |
3 | Erodes democratic accountability | 16 | Full public cost and economic and social impact rarely quantified |
4 | Value-for-money unproven and contrived. | 17 | Off-sheet balance finance conceals real level of public debt |
5 | Risk transfer is frequently exaggerated and mispriced | 18 | Increases corporate welfare and PPP business influence in public policy |
6 | Affordability and potential financial impact on other services | 19 | Creates two-tier workforce and reduces terms and conditions and equalities |
7 | Creates opportunities to extend private provision of core services. | 20 | Fragments and weakens trade union representation and organisation. |
8 | Increase in user charges | 21 | Weakens in-house delivery capacity. |
9 | Loss of flexibility with long-term contract | 22 | Loss of local production/supply chains |
10 | Delivery on time and price exaggerated and based on flawed evidence | 23 | Loss or erosion of public sector principles and values. |
11 | Reduces public sector capability | 24 | Outsourcing of support services |
12 | Quality of service variable with high additional costs for variations | 25 | Commercial confidentiality limits disclosure and participation |
13 | Quality of design often poor | 26 | Widens the global infrastructure market |
Source: Global Auction of Public Assets, Whitfield, 2010.