National’s PPPs go overseas to roost

With National and Labour talking about greater use of PPPs (Public-Private Partnerships) to build and maintain infrastructure – schools, hospitals, roads, prisons, student accommodation – it’s worth looking at what happened earlier this year to the last round of PPPs established under the previous National government.

The service contacts for John Key’s PPPs, which were negotiated with Morrison and Company have gone overseas to roost as approved by the Overseas Investment Office in April this year here with further information detailed in this CAFCA assessment and in a New Zealand Herald article from early June:

“The British firm will now be in charge of funding services to Auckland Prison at Paremoremo, five Auckland schools, one in Hamilton, four in Christchurch, one in Queenstown as well as AUT’s North Campus student accommodation on the North Shore. Hobsonville Point Primary School, Hobsonville Point Secondary School, Ormiston Junior College, Te Uho o te Nikau at Flat Bush, north-west Auckland’s Matua Ngaru Primary School, Hamilton’s Te Ao Marama School, Christchurch’s Shirley Boys’ High School and adjoining Avonside Girls’ High School, its Haeata Community Campus, Rolleston College and Queenstown’s Wakatipu High School are the 11 education assets involved”.

“It’s not the land or buildings being sold but rather service provision funding, so the British entity will take over running aspects like cleaning, maintenance and building management, contracted to the Government to provide those services under the public-private partnership model. In turn, that British business will then contract out those services to third-party local providers”.

There are plenty of horror stories from PPPs overseas and plenty of warnings – even from the World Bank.

Aside from everything else – here we have private sector parasites hoisted onto our community as a typical leech – bleeding us dry over a 25-year contract. The only “value” is that it keeps the debt off the government’s books. And please don’t tell us about the risks the private sector takes on in these projects – any large-scale failure will be paid for by us. Our government – as the only one left standing – will be forced to pick up the tab.

The “financialisaton of PPPs” – precisely as we have seen with Morrison and Co bundling up its PPP service contracts and then selling them off on the global market – will have long-term dangers which are ignored in the decision to approve the overseas sale of these contracts.

A further danger is the recent effort by the World Bank, the G20, OECD and others to ‘financialize’ PPPs in order to access the trillions of dollars held by pension funds, insurance companies and other institutional investors.

To access these funds, governments are advised to do a whole lot of PPPs at the same time in order to create a pool of assets that can then be bundled and sold on to long-term investors. This is exactly what the financial services companies did with home mortgages at the turn of the century, which brought us the global financial crisis of 2008.

In typical short-sighted fashion National and Labour are oblivious to the dangers and happy to leave us to pick up the tab.