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The end of PPPs

December 18th, 2008

I wrote a piece for the Centre for Policy Development on Public Private Partnerships which was also picked up by the Canberra Times. My favorite bit

The British government, which has nationalised or bailed out large parts of the banking sector is now suggesting that banks may be forced to lend to private investors in public projects under the Private Finance Initiative. In effect, the government will be lending money to itself, while paying the costs of a series of complex transactions (some of them highly vulnerable to exploitation) along the way.

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  1. jquiggin
    December 22nd, 2008 at 06:28 | #1

    While NCP doesn’t require the assumption that “the market will automatically deliver the best outcome in every circumstanceā€ it does start from a fairly strong presumption in favor of the market. The process of analysis it requires makes it quite difficult to include a range of reasonable social considerations.

    I’ll give an example from direct experience, which is typical of many. A publicly-owned infrastructure owner wanted to apply higher environmental standards than those required by law to its own operations and to those of any third party using the asset. This was successfully opposed as a restriction of competition.

  2. Ikonoclast
    December 22nd, 2008 at 07:19 | #2

    The NCP should be put down like a rabid dog.

  3. Alanna
    December 22nd, 2008 at 07:38 | #3

    Another aspect of the NCP has been the growth of intergovernmental charging. For example the ABS (and a myriad of other government departments) now charge user pays fees for data for research eg to public universities and others that used to be provided free in the national interest. So along with that comes the growth of accounts receivable and payable clerks in govt who’s sole function it is to cost shift from one government department to another. That can hardly be efficient and it also impedes (instead of assists) the flow of and analysis of information on the economy.
    We also get situations where eg a Local Council applies user pays charges to builders wanting to view tender documents for the purposes of eg a Council initiated public construction. Instead of a practical tender process the Council profits from the private sector by collecting “tender document viewing charges” giving it incentives to extend and delay the tender process as long as possible.
    It is not and should not be the business of government to profit from the private sector or from other government departments, by charging user pays fees for services intended to regulate and assist private sector business activities or assist other government departments.

  4. nanks
    December 22nd, 2008 at 08:17 | #4

    re intergovernmental charging – The mantras of ‘total cost recovery’, ‘transparency’ and ‘accountability’ have been counter productive. The effect has been to shift power to the executive by automating white collar work (ie reducing white collar workers to automatons). Administrative burden is increased and service quality does not seem to be improved.
    Whilst there may have been good motives initially, their use now just rings alarm bells of excessive control for me. The underlying managerial philosphy seems flawed and reminds me of the failed AI program from the 60′s where an attempt was made to specify all human knowledge. This was proven to be impossible, yet the same program continues in government.

  5. Alanna
    December 22nd, 2008 at 14:14 | #5

    Nanks I would go as far as to suggest that the blind insistence of intergovernmental charging (and inter departmental charging within the same government organisation) is part of the problem. Resources are taken away from actually providing the service to greater nitpicking administrative functions and paperwork that serve no useful purpose whatsoever except to cost shift.

  6. nanks
    December 22nd, 2008 at 15:10 | #6

    I agree Alanna – I think the justification for the endless nitpicking stems from a particular view of the world that is discredited – a view that holds it is possible to specify all objects and the relations that hold between them. An unfortunate jump takes us to ‘only those things that are specified exist’ Once one thinks that all objects and relations can be specified some people find the temptation to specify in the name of oversight and efficiency irresistible.

    an aside – I am an ex-academic and was talking to a newly ex-academic yesterday. When I joked that University admin departments had changed from performing administrative procedures to developing administrative procedures for others to perform she gave a laugh of recognition.

    Of course I was only joking.

  7. rog
    December 22nd, 2008 at 17:45 | #7

    Alanna,

    the PWD was one of the greatest waste of taxpayers money ever – thats why they downsized it. As public servants tumbled over themselves to gain grading points workers worked slower and slower and costs blew out.

    Trust me, it was a rort

  8. Alanna
    December 23rd, 2008 at 17:01 | #8

    Nanks – you said

    “an aside – I am an ex-academic and was talking to a newly ex-academic yesterday. When I joked that University admin departments had changed from performing administrative procedures to developing administrative procedures for others to perform she gave a laugh of recognition.”

    Most definitely!!!! There are admin departments that now justify their existence by developing new policies for academics to follow (and bear the cost of). Just keep throwing the ball back. We have academics supervising exams in some institutions as a cost saving? Hello ? Thats great – waste a good phds precious enough research time on exam sitting to save a few dollars. You can count on admin to keep coming up with some doozy ideas.

    I totally agree and the worst of it all comes when some middle manager is rewarded for finding efficiencies in costs in some very small department. Im sure there are reams of public servants now whose sole job it is to invent new user pays charges to lay on the public at a profit. The whole notion of applying the profit maximising objectives of the private sector and assuming those objectives apply to public goods and services provision was the wrong direction to go down in the first place. Public organisations should not be seeking to profit at the expense of the private sector and nor should they be forced into a situation of haggling over costs in their own organisations. Its totally muddied the proper purpose of public service.

    You only have to look at the figures for debt levels over the past twenty years. Public sector debt has fallen substantially, company debt levels have also fallen sunstantially (at least before the meltdown) but private sector debt levels have escalated horribly.

    The ethos of charging the public user pays for government services that were once nominally charged or free is an additional burden that would have played at least some role in rising private sector expenses – debt levels. Id also like to see the endless hockey playing over costs be curbed in the public sector to actually gain some efficiencies back.

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