Fw: Open government vs. capital shortage

Christian A. Gregory christian11 at mindspring.com
Sat Nov 3 15:12:30 PST 2001


Mat,

This is what I was referring to in my post about public-private-partnership accounting in the UK.

Christian

----- Original Message ----- From: "Michael Keaney" <Michael.Keaney at mbs.fi> To: "PEN-L (E-mail)" <pen-l at galaxy.csuchico.edu> Sent: Tuesday, October 23, 2001 3:45 AM Subject: [PEN-L:18996] Open government vs. capital shortage


> Penners,
>
> Alas, it appears that my earlier speculations regarding the possible
> reorientation of New Labour's relationship with finance capital were
> forlorn, in that the promised restructuring is in fact going to deepen
> that relationship, rather than restore the older state sector financing
> rules. With the sudden flurry of media stories concerning the impending
> difficulties facing Gordon Brown as he attempts to hold fast to spending
> promises and deliver tangible improvements in the crumbling public
> infrastructure, the quick fix bought on the mortgaging of the long term
> (so long the target of Brown's criticisms when he was professing
> socialism and very much the focus of Will Hutton's continuing critiques
> of UK political economy) is, it appears, about to step up a gear.
>
> =====
>
> Treasury to overhaul PPP rules to bring in more private sector funding
>
> By Saeed Shah
>
> The Independent, 22 October 2001
>
> The Treasury is set to rewrite the
> rules governing its controversial
> Public Private Partnership in an
> attempt to encourage even greater
> private funding of public sector
> projects.
>
> The changes, due to be
> announced shortly, are likely to
> provoke a political storm and
> prompt accusations from critics that the Government is
> cooking the books in favour of the PPP in an effort to take
> private sector funding still deeper into areas such as health and
> education.
>
> Treasury officials are working on a fundamental revision of the
> "Green Book", which sets the standards for accounting for
> public investments. Assumptions made in the Green Book are
> key to testing proposed PPP schemes to see if they pass the
> crucial "value for money" test.
>
> Under the present rules, PPP financing is only allowed if it can
> be demonstrated that the private sector efficiency gains
> achieved will outweigh the cheaper borrowing costs of financing
> a project in the public sector.
>
> The changes being planned will allow Whitehall departments to
> take into account for the first time factors such as cost
> overruns and delays in the public sector as well as the quality
> of service and design delivered by operators in the private
> sector.
>
> Opponents of the PPP have always charged that the system is
> biased in favour of the private sector ever since its forerunner,
> the Private Finance Initiative, was introduced by the former
> Tory Chancellor Kenneth Clarke in the early 1990s.
>
> However, the Treasury believes that, far from favouring the
> PPP, current public accounting standards discriminate against
> it. It now aims to fix that. The Treasury may get the National
> Audit Office to endorse the new methodology before
> publication.
>
> "The Green Book is careful and conservative. But the quality
> and consistency that PPP has achieved is better than anything
> the public sector ever did. A new analysis must reflect that,"
> said a source close to the Treasury.
>
> The Treasury and firms heavily involved in PPP schemes
> believe the way that the public sector comparator test is
> applied takes too generous a view of the capabilities and track
> record of the public sector and fails to acknowledge the proven
> advantages of the private sector.
>
> David Toplas, director of the Norwich Union PPP Fund, said:
> "The PPP provides for Rolls-Royce because these are
> long-term projects and we recognise that spending more now
> will provide long-term value."
>
> Although features such as the quality of service delivered and
> superior design are difficult to quantify, the new Green Book
> will attempt to do so. Other aspects it will tackle are areas
> such as cost over-runs, which under current rules are assumed
> to be around 12 per cent in the public sector. Experts believe
> the reality is more like 40 per cent. It will also take into
> account the likelihood that a project will not be delivered as
> quickly in the public sector.
>
> "The fact that the PPP will deliver the hospital two years ahead
> of the public sector is not currently in the analysis. We must
> get the argument away from emotion to the facts," said one
> PPP consultant.
>
> Supporters of the PPP believe its solid track record means that
> assumptions now need to be reworked. Since 1992, when PPP
> was first introduced, some 180 projects have been completed
> and are now operational. Of these, 73 projects have a capital
> value in excess of £15m. Together these projects amount to
> some £5.1bn in capital value and include eight roads, seven
> hospitals, six prisons, a number of schools and colleges and
> various training projects for the Ministry of Defence.
>
> Full article at:
> http://news.independent.co.uk/business/news/story.jsp?story=100694
>
> Michael Keaney
> Mercuria Business School
> Martinlaaksontie 36
> 01620 Vantaa
> Finland
>
> michael.keaney at mbs.fi
>



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