Private finance pros and cons highlighted
Saturday 8th November 2008, 9:29AM GMT.
Speakers, left to right, Martin Thornton, Robert Griggs, Giles Frost and Keith Dorrian at yesterday’s Institute of Directors seminar at the OGH. (Picture by Peter Frankland, 0668338)
A NEW approach to financing and undertaking major States projects was presented yesterday.
Politicians and businessmen laid out the advantages and disadvantages of PPPs – private public partnerships – at the first of the Institute Of Directors’ winter seminars.
‘Virtually all governments face the same issues – the strong need to renew and repair infrastructure assets to keep the community and the economy going because facilities reach the end of their lives, technology changes and puts them out of date, hospitals and schools must change,’ said Giles Frost, the Oxford-educated head of public infrastructure at Babcock & Brown.
But the problem they all faced, he said, was how to fund this work.
As there is a reluctance to rely on debt or to increase tax, PPP could be a good option, he said, but options and plans had to be considered thoroughly.
‘It is not a one size fits all approach. We need to look around and see what’s successful and what might work for Guernsey,’ he said.
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Babcock & Brown. are heavily into the lucrative area of PPP and PFI
Thus they have a vested interest. Odd nothing is reported from the anti PPP PFI side.
The Babcock salesman is reported to have said:
“As there is a reluctance to rely on debt or to increase tax, PPP could be a good option, he said, but options and plans had to be considered thoroughly”
Let’s have a little look at the reality of what is said.
“So there is a reluctance to rely on debt and or to increase tax” This gives the impression there is a Father Christmas out there. The facts are that PPP ? PFI schemes have taken off because the UK Government wanted to keep public borrowing off balance sheet.
The facilities provided by PP and PFI’s are simply another form of public debt. The piper has to be paid and well paid. So they are increased public debt, although in a different package; and the often exorbitant cost equates to another form of tax.
What the salesman is right about is that the options have to be considered thoroughly. and wider than he and his firm would wish.
It is a fact that direct borrowing interest rates by government are lower than interest rates that are available to PFI groups. Audit Scotland have calculated these costs as adding £0.2 – £0.3 million each year for every £10 million invested.
Just get a calculator out, and work out the additional cost of £400million over an average PPP life of 25 years.
How many schools, waste systems etc could you get from the additional annual expense of roughly £10million a year.
Then you have to add in the cost of using the service which will generate the profit for the PPP provider. This profit will include repaying the cost of his borrowing, the interest on that borowing, cost of using the service and his profit margin.
Make sure you are sitting down with a hot cup of sweet tea to combat the shock of realizing the extra cost of falling for slick sales patter.
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How about starting with our loss makers. Our current states mmbers would be the first to be out on their deaf ears then. I am not slating all of them because I know that a lot have their hands tied and lips buttoned. Can any politician speed up the process where we start using what we have and capitalise on it for the greater good of us all? We don’t have much to spare at the moment but with some radical thinking this would soon be turned around. Finance is not the be all. If they wish to stay then that is up to them. If they wish to go then seeyah. Times are challenging for us all but we will emerge leaner, keaner and fitter as a consequence. It is time we stoped complaining and actually take a look at what we have which is a lot more than most I am confident of this.
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Can someone in the know please point me to an example of success of this sort of deal? Let us remember that success is measured by public benefit and not private benefactoring.
I fear that we have run ourselves into the ground in supporting the avaricious and have stopped paying attention to common sense.
I am heartened somewhat by Dep Parkinson’s assertion that we need to increase spending in some public sectors in order to boost a wider economic recovery. Without basic infrastructure we are nothing. We have been getting closer to nothing all the time that the rich have been getting richer.
Surely the evidence suggests that Government borrowing is cheaper than any PFI/PPP schemes? That said, I would prefer to tax the rich until they get some sense of societal proportion. Will they then see Guernsey as a natural jewel, as they constantly splurge in the media, or will they bow down to the reality that Guernsey is an easy target for expense mitigators, the type of people that most would not have the time of day for if they knocked on your doorstep hawking nonsense.
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Fast Robert
Peole such as Giles Frost of Babcock are interetsed in private benefacting and clear sees Guernsey as rich pickings – making a fast bob!!!!!
As you know few potential deputies in the last election, including some who were elected, had no idea of PPP / PFI financing, nor of the ins and outs of zero 10.
The dange ris that ignorance and slick presentation will leave future tax payers with crippling tax bills and, of course, after 25 years the process starts again with further additional cost.
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