PSA Media Release
July 23, 2009
For Immediate Use

PIP fund part of government’s privatisation agenda.

“The Public Infrastructure Partnership Fund established to build schools, hospitals, and prisons, is another part of the government’s privatisation agenda,” says PSA national secretary Richard Wagstaff.

“The PIP Fund is a public private partnership, a form of privatisation used to build schools and hospitals in Britain that has proved very expensive for British taxpayers.”

“Even Treasury says that there is little evidence to show the costs and benefits of public private partnerships,” says Richard Wagstaff.

Treasury issued a report on PPS in 2006 that concludes:”There is little reliable empirical evidence about the costs and benefits of PPPs.”

The report also states “There are other ways of obtaining private sector finance without having to enter into a PPP; most of the advantages of private sector construction and management can also be obtained from conventional procurement methods (under which the project is financed by the government and construction and operation are contracted out separately).”

The PIP Fund has been announced by HRL Morrison and Co. The company says the PIP Fund will design, build, finance and maintain assets like schools, hospitals and prisons for 25 to 35 years in return for an annual fee.

PPPs are a type of privatisation because they involve private companies building, running and owning infrastructure, like schools and renting them to the government on long-term leases.

“British taxpayers know the cost of being locked into these long term leases,” says Richard Wagstaff. They’re paying to maintain a PPP-built school, for the next 18 years, even though it closed last year.”

The school, in Northern Ireland, shut because it’s no longer viable. Its roll dropped from 326, when it opened in 2002, to 150. But UK taxpayers will have to continue paying a million dollars a year for its maintenance until 2027.

“PPP-built hospitals in Britain are also in trouble because they’re locked into crippling long term contracts with private companies,” says Richard Wagstaff. “Two London PPP hospitals were declared technically bankrupt in 2005.”

Queen Elizabeth Hospital in Woolwich was hailed as a flagship for the PPP model when it was opened in 2001. Four years later it was insolvent because it was locked into a 30 year contract it could not afford. The hospital has to pay $49 million a year, $22 million more than if it had borrowed the money from the government.

“Princess Royal Hospital in Bromley has the same problem with a 35 year PPP contract and has also been declared bankrupt,” says Richard Wagstaff.

Queen Elizabeth, Princess Royal, and a third PPP hospital in south east London, now have a combined debt of just under $500 million. This is going to have an impact on healthcare throughout London. That’s because in December last year the London’s other National Health hospitals agreed to bail out the debt crippled PPP hospitals by providing part of their funding for the next two years.

“Overseas experience shows the risk and costs in using PPPs to providing infrastructure like schools and hospitals,” says Richard Wagstaff.

“Treasury also warns against the risks and costs of PPS and shows that conventional methods of building schools and hospital have an advantage because they don’t carry these risks and costs.”

“And yet the government is pressing ahead with PPPs as part of privatisation agenda.”

ENDS

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