Socialists Condemn Latest PPP As ‘Waste of money’

Glenrothes SSP Press Release 26th June 2002
Members of the Scottish Socialist Party in Fife have condemned the announcement of a second Public Private Partnership for the region as ‘utter madness’. They claim that the repayment of PPP’s end up costing the local taxpayer up to five times the original projections for building the nine schools. They also claim that the process is unaccountable, and deliberately weighted in favour of the private sector.

"Christine May said yesterday that £160 million is needed to improve schools in Fife. That is the amount that will eventually be paid for the so-called ‘£40 million’ PPP deal which was finalised last September," said Glenrothes SSP press officer Jim Balfour. "What was described yesterday as £53 million of PPP deals, is likely to eventually cost the taxpayer over £200 million."

In deciding whether to use PPP funds councils use the so-called Public Sector Comparator to determine whether a privately financed scheme gives value for money. Earlier this month, the auditor-general of the National Audit Commission admitted that some of the comparators used are "utter rubbish" and "utterly irrelevant". [Quoted in ‘A Challenge to the Chancellor’ by George Monbiot. The Guardian, 18^th June 2002]

"It’s a fraud in which comparators and highly dubious assessments of ‘risk transfer’ are used to justify paying four or five times the capital costs of construction," Jim Balfour added. "As we have seen recently with Railtrack, when a private foray into public service goes awry the government is only too happy to bail out shareholders. I think this shows quite clearly that no risk is actually being transferred to the private sector at all."

The SSP were heavily critical also of the secrecy that shrouds PPP deals. "Private companies can make all sorts of extra demands of councils once they get Preferred Bidder status. The trouble is that even democratically elected councillors can be prevented from finding out exactly what is going on, due to commercial confidentiality."

But the bottom line for the SSP is the sheer cost of private firms borrowing money at the higher rates available to private companies, and servicing loans whilst meeting their fiduciary responsibility to shareholders. "Local authorities could borrow money more cheaply from the government, and keep the process accountable to the people who elected them. A private company’s top priority - by law – is to its shareholders. This is not just about ideology, this is a scam founded on dodgy number-crunching and breached public trust, wrapped up in a confidentiality clause. It’s insane."