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PPP policy proves more than just a privatisation push

LAST time Treasurer Eric Ripper became involved with a plan that carried a number of Ps in its initials, PPT – premium property tax – it sparked a bitter campaign by the well-off, forcing him and Premier Geoff Gallop into hasty retreat.

Despite that, Mr Ripper is now backing a program with three Ps in its initials – public-private partnerships (PPP).

A PPP is basically a contract between a public agency (Federal, State or local) and private investors through which the skills and assets of each are shared to deliver service to the public.

This generally includes multi-million dollar buildings such as office blocks, hospitals, or schools.

Both parties – government and private investors – share in the risks and returns in delivering the facility.

Leftist-oriented ideologues will immediately be prompted to oppose such ventures because they’ll contend they’re privatisation via the backdoor.

On that, as on so many things, they’re simply wrong.

Privatisation is selling-off publicly owned and (earlier) financed assets, as happened with BankWest, Alinta Gas, and the Dampier-to-Bunbury gas pipeline.

A PPP acquires use of facilities by negotiating with private investors to construct them, and ensure public utilisation.

It’s worth noting, however, that PPPs aren’t entirely new to WA.

Two come to mind: the huge Midland-based Department of Land Administration building, and Fremantle’s Justice Complex, built by Multiplex Construction under the Coalition, which is being leased for 25 years until it reverts to the State.

Interestingly, NSW’s new Liberal leader John Brogden announced this month that PPPs were on his agenda.

Last October Mr Ripper visited London for briefings on PPPs and Treasury is now preparing what are hopefully efficient and appropriate local guidelines.

Although Dr Gallop is ideologically left of centre, he probably agreed to the PPP initiative because his old Oxford buddy, Tony Blair, has enthusiastically embraced it.

If PPPs are adopted there’s no reason that, within 50 years, most of WA’s schools, hospitals, police stations, courts and the like won’t be PPP assets – used by the public but not actually publicly owned.

The policy could extend that far.

And WA’s local government authorities may follow.

There’s also probably nothing stopping church-based education commissions, private hospital and retirement village complex managers/ providers doing likewise.

In other words, the State Government and others could move right away from building and owning costly assets, to becoming long-term tenants via PPP.

Only time will tell just how far governments and others go in this direction.

Clearly a new specialist service sector involving financiers, accountants, architects and merchant bankers would emerge, and consequent specialist knowledge will be utilised and refined by private and public sectors.

An obvious advantage is that the initial capital outlays – tax revenue and/or public borrowing – to construct costly facilities need not be found, only annual rents and, possibly, maintenance.

“While the Government did not favour contracting out and would not embark on privatisation, there is scope for public-private partnerships where there was a clear community benefit,” Mr Ripper said.

“The Government spends $10 billion a year on services and $3 billion on capital works. There may be opportunities to work collaboratively with the private sector to make the Government dollar go further.

“Demand for Government services is growing, yet there is little appetite for increases in taxes to pay for these services, so Government has to get better value for its money.

“Public-private partnerships had resulted in road projects in M4, M5 and M2 freeways in NSW, and the $2 billion Transurban road, Spencer Street Railway Station and the County Court projects in Victoria.

“In the United Kingdom, schools, defence infrastructure, police facilities and public housing had been built through public-private projects.”

The examples chosen may be hints of the direction of thinking in the Treasury’s forthcoming PPP position paper.

But, speak to PPP experts and you’ll discover all sorts of combinations between the public and private sectors involving assets and their usage, including; operation and maintenance, design-build, turnkey operation, lease-purchases, lease develop-operate, buy-develop-operate, build-transfer-operate and build-own-operate transfer, to name some.

Six years ago the Canadian province of Nova Scotia launched a PPP program to construct schools. By late 1998, 41 new schools had either been completed or approved, and another dozen proposed.

Scotland also has embraced PPPs in provision of education. By 1999, more than 70 schools servicing 50,000 students in eight local authorities, including Glasgow and Edinburgh, were scheduled for replacement or renovation.

PPP are therefore far from new. WA, if anything, is lagging somewhat.

What’s absolutely crucial, however, is that all PPP contracts be open to Parliamentary and Auditor General scrutiny.

And secondly, all political donations by businesses to parties must be direct and fully disclosed because of ongoing temptation for secret ‘kick-backs’ by businessmen desperately wanting to become private partners.

Without such checks, adoption of a PPP policy may well mean another WA Inc-style Royal Commission. Something WA doesn’t need.

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