Compulsory PPPs Nats’ latest senseless fad
National's lack of a coherent plan for jobs and growth is evident from its latest fad --- requiring Crown entities to compulsorily assess PPPs for all investments over $25 million, says Labour Finance spokesperson David Cunliffe.
"This is a ridiculous sop to private interests that bears no relationship to prudent asset management," David Cunliffe said. "It will inevitably lead to bad decision making, fire sales of Crown assets, higher capital costs for taxpayers and a bigger burden for future generations."
David Cunliffe said Labour did not rule out PPPs where they are in the public interest, but extensive international experience showed they should be approached with great care to avoid unintended consequences and costs to taxpayers.
"Ironically, National's ideological requirement for compulsory assessment of PPPs is the granny state gone mad,” David Cunliffe said. “PPPs add value only where the benefits of risk sharing and management are so great that they outweigh higher capital costs and profit margins required by the private partner. Usually that doesn’t happen, and that’s why only projects worth several hundred million dollars are viable.
“Not only is $25 million a ridiculously low threshold for a meaningful PPP, but the fact is that Labour required all business cases to canvas all possible options for delivery anyway,” David Cunliffe said. “It makes you wonder why Bill English is so committed to talking up National’s attachment to PPPs whenever he gets the chance.
“Negotiating PPPs with savvy investment banks requires specialist skills most Crown entities simply do not have, so National's one-size-fits-all approach risks taxpayers being taken for a ride as state sector CEOs feel obliged to comply with the Minister's ideological approach. It’s like letting private sector foxes loose in the Crown asset chicken coop --- it’s bound to end in feathers flying and tears before bedtime.
“Using a PPP option simply because the Crown won’t or can’t invest itself directly usually leads to higher costs to taxpayers in the long run,” David Cunlliffe said. "National is simply hiding a problem it has created and once again has shunted costs on to our kids --- so much for fiscal responsibility and fairness across generations.
"The implication is that National wants to use PPPs instead of investing directly because it has cut taxes so far it cannot service prudent investment debt. National should admit that tax cuts for its rich mates today will place enormous costs on young Kiwis tomorrow. PPPs are not free money --- the private partner makes a profit and the debt has to be paid back at higher rates than Crown borrowing.
"This is one more desperate ploy by a government with no coherent plan for growing the economy or creating jobs. It desperately hopes the private sector will finance projects it lacks the vision, courage or resources to do itself,” David Cunliffe said.
