Public-private partnerships:
What's in store for schools?

Peter Steele*

Governments around the country continue to promote arguments about 
maintaining surpluses and reducing public debt. They are also, invariably, 
promoting the idea of public-private partnerships.

Referred to in Australia as PPPs, the scheme involves private enterprises 
building, owning and operating physical infrastructure.

For example: school buildings, hospitals, courts, correctional facilities, 
film and television studios, roads (Citylink), fibre optics, wastewater 
treatment plants and reclaimed water projects.

In Victoria, PPPs are organised through Partnerships Victoria, a Victorian 
Government policy that facilitates business interaction between parties 
seeking consortium partners [helps private businesses get together to 
provide facilities] and businesses otherwise interested in participating in 
Partnerships Victoria projects [single businesses wishing to deal directly 
with the Government]. (Government of Infrastructure website.)

The Spencer Street Station development site in central Melbourne is a good 
example of a public-private partnership being operated under the Bracks 
Government.

According to newspaper reports the Government will make payments towards 
this project of $310 million.

As the official website states, "The station and its precinct will be 
redeveloped over three years in a $700 million public/private partnership 
between the Victorian Government and the Civic Nexus consortium, comprising 
ABN Amro, Leighton Contractors, Daryl Jackson Architecture, Nicholas 
Grimshaw and Partners, Honeywell Limited and Delaware North Australia.

The project ... includes a retail plaza, and three office and apartment 
towers as part of a massive commercial redevelopment of the precinct ..."

In most cases, including schools, governments enter into arrangements where 
they lease the building/infrastructure from a private enterprise, in order 
to reduce infrastructure costs. This situation supposedly reduces overall 
public debt and frees up funding for important social service provision.

The problem for Victoria's Bracks Government is that the evidence from the 
overseas experience — namely the United Kingdom — reveals that the 
outcome of these schemes has the opposite effect.

In a paper about private financing of public infrastructure John Quiggin, 
from the Australian National University (ANU) says, "In retrospect many of 
these projects have been shown to have reduced the net worth of the public 
sector, and to have incurred higher financing costs than would have arisen 
with traditional methods based on the use of bonds to finance publicly 
owned assets."

Hypothecation is the putting up of securities as collateral, for example, 
pledging buildings/land as security without the delivery of titles or 
possession. This is the basis of the public-private partnership. 
Ironically, Treasury is traditionally opposed to hypothecation — which 
commits government funds to specific and finite projects for years.

Budget tied up

Fifteen per cent of the UK budget is tied up in these deals. By entering 
into such long-term agreements now, governments tie large amounts of 
expenditure and reduce their ability to continue funding important social 
services into the future. Expenditure is therefore constrained, not 
released, by PPPs and hypothecation.

How is it that the Bracks Government, which says it has to reduce debt, 
wants to enter into schemes which commit Treasury funds for years ahead? Is 
this not just another form of debt?

The answer according to three speakers at a seminar on July 16 on PPPs: Are 
They Worth the Trouble? is that Labor governments seem to have to please 
the big end of town.

To do this, such governments are now advancing the notion that pubic-
private partnerships will reduce public debt, along with other spurious 
arguments about debt reduction.

Clearly such notions are a potential issue for government schools (see 
"Partnership Victoria: Riding the Rocky Road to Privatisation?" ("AEU News" 
14/03/02).

Another form of privatisation

There is growing concern that PPPs are simply another form of privatisation 
where the private sector takes the profits, while the public sector carries 
the risks. To this end, the AEU has made a submission to the public 
accounts and estimates committee inquiry into private sector investment in 
public infrastructure.

The Australian Education Union is totally opposed to any form of private 
operation of public schools. The provision of public education is a state 
responsibility and, rather than being weakened by private partnership, this 
responsibility needs to be strengthened through greater government 
commitment to adequate resources.

The ALP Victorian Branch May Conference is reported to have made a decision 
to prohibit private ownership of "human services" infrastructure.

If articles by Kenneth Davidson in "The A did not lead me to have doubts 
about the Government's intent in pursuing PPPs, then a young man asking 
questions at a recent seminar did.

The seminar, titled "Private/Public Partnerships: are They Worth the 
Trouble", looked at what has happened in the UK regarding PPPs and compared 
that experience to what is occurring in Australia.

After the seminar finished a young man stood up and questioned the three 
speakers, concerned that they appeared to be opposed to PPPs and that there 
had been no debate on the issue which could have put the points in favour 
of PPPs.

The young man was none other than Premier Steve Bracks' senior economics 
adviser! I'll leave you to draw your own conclusions about the direction of 
the Government's policies.

* * *

* Vice President Primary, Victorian Branch of Australian Education 
Union.

Acknowledgement to The AEU News August 8, 2002.

The original article and back issues can be found at:
http://www.aeuvic.asn.au