A total switch to public sector delivery is not the answer to mistrust of the private sector; they lack the breadth of skills across government and where they have delivered public sector projects successfully, they have often relied on importing private sector skills. The Infrastructure Forum's earlier paper on alternative finance models argued for a mixed economy of both public and private sector delivery, to share skills and benchmark performance. For new infrastructure, we need an approach where the public sector can enjoy private sector skills around managing risk, cost controls and technical due diligence but where it can also trust private owners will have a long-term focus and be flexible and customer focused.
Some commentators hold the position that any element of profit should not form part of the delivery of public services. An extreme position, which doesn't dwell on the difficulties with public sector ownership and delivery that the last 25 years of privatisation and PPPs were largely introduced to overcome; publicly-owned infrastructure suffered from cost overruns on major projects, lack of cost control, budget annuality, and a lack of experience where in contrast the private sector has a greater volume of project experience and international precedents to draw upon.
In practice, few have faith that if there were a full transition to public sector delivery, the public sector would deliver more effectively, efficiently or responsively than the private sector. Distrust in the profit motive would be replaced with distrust in political processes, lack of market signals, and centralised bureaucracy.
A mixed economy of public and private sector delivery is the way to raise everyone's game and give comparability between a range of public and private models.
While this does not logically have to be the case, in large parts of the public sector there would not be the skills to take over this ownership and delivery challenge. So, the public sector does have to rely on private sector delivery in some shape or form. The question becomes what form; whether that should be with full risk transfer in a PPP, or a traditional short-term contract managed by the public sector, or whether it would actually be better to work closer together, using private sector skills and focus but with a governance that aligns the parties, not sets them on a course of mistrust.
The combination of lower cost delivery and better governance recommended in this paper could bring in private sector cost disciplines, focus, risk transfer and independence but in a way that allows flexibility, aligns objectives, allows less regulation and a lower cost of capital and builds trust.