Belfast Telegraph

Friday 22 August 2014

Left to count the cost of Public Private Partnerships deals

The attraction to Public Private Partnerships (PPP) as a way of funding public sector projects is obvious, especially in a place like Northern Ireland where the infrastructure in the health, education, water and roads sectors is in poor condition due to historic lack of investment. PPP essentially allows government departments to enter into agreements with private companies to build, maintain and, in some cases, manage facilities which it does not have the money to fund in the short term.

But as the case of Belfast Metropolitan College's Titanic Quarter campus shows, it is by no means a foolproof way of financing developments.

The college hoped that two campuses made redundant by the new development could be sold to help fund the project, but the property crash meant that there will now be a shortfall in the cash realised and that will have to come out of the public purse.

Some might argue that this was not a typical PPP and that pinning hopes on rising property prices was somewhat foolhardy, but it is not the only criticism of PPP.

The charges attached to the deals – which typically run for 25 or 30 years are eye- watering and higher than if government simply borrowed the money at the preferential rates it can obtain. Public sector bodies are seen as good risks in the money markets as they are unlikely to either go bankrupt or default on loans, hence the very competitive rates such bodies can obtain.

Another objection, especially relevant in Northern Ireland, is that it hinders attempts to rebalance the economy. PPPs favour large multi-national companies which mean that the private sector in the province is often excluded from vying for valuable government contracts. There are very few large companies in Northern Ireland capable of competing against established PPP providers.

So essentially we are obtaining poor value for money and doing little for the local private sector in going down the road of PPPs. One day we may regret putting ourselves into hock with private multi-nationals and wonder if they got by far the better return on the deal.

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