Government wastewatch: PPPs

Written By: - Date published: 8:58 am, June 20th, 2012 - 4 comments
Categories: privatisation, Public Private Partnerships - Tags:

So, National is using a Public Private Partnership to build a school in Hobsonville. You’ve heard of PPPs. They, like all privatisation, are billed as somehow unleashing the magic of the market to reduce costs. But the reality is they turn the taxpayer into a dairy cow to be milked by private profiteers. And this school is no different: it’s costing us more, and the profiteers are racking it in.

Here’s Chris Hipkins’ run down of the story:

The Government’s blind belief that privatisation will save the taxpayer money has been proven wrong once again. Today in the House I quizzed Associate Education Minister Craig Foss on figures quietly released by the Ministry of Education that show the much vaunted Public Private Partnership to build the Hobsonville Schools in Auckland will actually cost the taxpayer more than it saves.

According to that information, private developer Learning Infrastructure Partners can charge the Ministry of Education a maximum price of $111.069 million under the PPP contract. Documents released under the OIA indicate the Ministry of Education estimate it would cost $113 million if built using normal public sector processes, a saving of $1.98 million (over 25 years).

However, Budget documents reveal they’ve spent $3.5 million over the last 2 years developing the Business Case for the deal, more than the PPP is destined to save. No wonder the Government tried to keep these details undercover.

What’s more, the $2 million saved over the next 25 years is pocket money compared to the savings John Key boasted PPP’s would bring. It wasn’t long ago that he boasted PPPs would be cheaper because “If they weren’t, no government would consider them”.

For a Government that professes to be focused on cutting back office waste, this is a stunning waste of money from our education budget. Private consultants have been the real winners from this deal, not taxpayers; KPMG and Castalia have pocketed $995,000 and $152,000 respectively for their roles in developing the business case.

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So, in setting up this PPP, we’ve spent more than it would supposedly save.

Oh, and we’ve not got guarantee these private sector profiteers will be able to deliver services to standard. I confidently predict millions will be spent over the course of the contract by the ministry trying to get the private providers to do their job properly.

4 comments on “Government wastewatch: PPPs ”

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  1. prism 1
    20 June 2012 at 9:46 am

    PPPs seem a form of cannibalism. A stable system of government enables the development of enterprise and infrastructure the process of which business supports and gains advantage, and then business expands and is enabled to flourish. Then when big enough, it turns round and eats the government and its vital parts, finally its heart.

  2. DH 2
    20 June 2012 at 10:51 am

    PPPs were always a scam. Broken down to it’s most basic level a PPP is a mortgage, the Govt pays off the asset over a period of 20-25yrs and then owns it. Private sector finance is the most expensive finance there is, plus the private operator has to make a profit on top. They can never be cheaper.

  3. tracey 3
    20 June 2012 at 1:51 pm

    It’s an alternative way to feed the 1%. Assets sales is more overt, PPP’s (especially in health, prisons and education) are the covert arm.