Close up of wrecking ball cracking concrete
Close up of wrecking ball cracking concrete

PoliticsMay 17, 2018

PPPs? Not really partnerships, and certainly not the solution

Close up of wrecking ball cracking concrete
Close up of wrecking ball cracking concrete

The label public-private partnership is a misnomer for approaches that are ill-suited to solve the problems in our public sector, writes Glenn Barclay, national secretary of the NZ Public Service Association

A partnership of equals is a truly beautiful thing. Martin Guptill and Kane Williamson. Bret McKenzie and Jemaine Clement. Thelma and Louise. It implies complementary skills, an indivisible pairing, the whole being more than the sum of its parts. It does not call to mind the uneasy marriage between public good and private cash, service and profit.

The new government is preparing to deliver its first budget, and as predictably as night follows day, public-private “partnerships” have been back in the news. They have been heralded even as a “revolutionary” idea for the massive funding deficit in health. But with the greatest respect: PPPs are not partnerships, they’re not revolutionary and they are not a solution to the problems in our health system – or any other part of the public sector.

One reason governments like these arrangements is that the private sector party borrows the money, thereby keeping that debt off the books. The Labour-led government, having (we argue, needlessly) committed itself to its Budget Responsibility Rules, might consider this a plus. But the long-term pain very much outweighs the short-term gain.

Governments can borrow money for less. If the deal turns sour, buying back the project can cost a lot of money. The saga of Serco and its ill-fated contract to run Mt Eden Prison should be a cautionary tale. And in the UK, the collapse of one single business Carillion means nearly 500 contracts must now be unpicked. Many of those contracts specify if there is only enough money to pay the private company or provide public services, the private company comes first. In the words of columnist George Monbiot, “however deep the crisis in the NHS becomes, however many people must have their cancer operations postponed or be left to rot on trolleys, the legal priority is still to pay the contractor. Money is officially more valuable than life.”

In theory, risk is transferred from the government to the private provider; but ultimately the risk rests with the government. So these arrangements are not partnerships of equals.  A better term would be Private Finance Initiatives, PFIs for short, which is how they’re described in the UK. That’s at least honest.

The private sector does need to be involved in, say, building hospitals, since the government no longer has a Ministry of Works. But these should be contracts procured and paid for by the Crown.

That there’s a crisis in health is not really a matter of opinion any more. The Council for Trade Unions and the Association of Salaried Medical Specialists has calculated a $2.7 billion dollar hole in the health budget. That’s no surprise to anyone who’s been paying attention. The very real consequences of trickle-down economics are trickling down the walls of Middlemore Hospital. Something needs to be done.

But here’s the rub. Some services are just too important to be entrusted to the private sector. Plenty of businesses fail. The assumption that the private sector is more efficient than the public sector is largely a myth, and governments may find themselves stuck in rigid contracts which can’t adapt to uncertain times.

The PSA argues that a PFI is not the solution for the health system. As we have seen, there are many, many examples in the UK of health PFIs going seriously awry. We want a commitment to proper resourcing, including full funding of equal pay settlements and decent pay rises. Health is not a nice-to-have. It’s something New Zealanders need at the centre of their lives, and it must be done right.

“How revolutionary do voters want the new government to be?” Newlove asks. The PSA’s answer: a truly revolutionary government will push aside the easy solution of a PFI. It will commit to rebuilding a health system that’s owned by all of us and benefits all of us.

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