If the Government's public-private partnership plan for majorinfrastructural projects goes ahead the public side will provide the capitaland the private one will take almost no risk and carry off obscene profits,argues William Kingston
If the EU really has put difficulties in the way of the Government proposal for a mega-quango to deal with all infrastructure investment, it confirms the value of Brussels having power to curb our politicians. This component of Fianna Fáil's manifesto - setting up a National Finance Development Agency - should never have survived into the Programme for Government, as it is the most extreme example of the "public-private partnership" approach to funding such projects yet seen in these islands.
Unfortunately, there is overwhelming evidence from practical examples in Britain and the US, as well as here, that it does not work. Indeed, there are also sound theoretical reasons why it cannot work.
The public-private partnership idea became fashionable after the discrediting of collectivism by the collapse of the Soviet Union, when electorates in mixed economies reacted against the way public money was being squandered by incompetent bureaucrats. What could be more reasonable, then, than to tap the management expertise of the private sector, by bringing entrepreneurs from it into partnership with the State? In Ireland, for example, would this not prevent repetitions of the failure of the enormous sums expended on health in recent years to achieve much beyond a huge expansion of bureaucracy?
However, all successful industrial partnerships depend upon rough parity of resources between the members, and the insuperable problem about public-private partnership is the utter disparity between the civil servants on the public side and the hard-nosed businessmen on the private one. This disparity is not in terms of moral fibre or ability, since civil servants are no worse than other people and may be better than many. The issue comes down to motivation.
The conditions under which civil servants inescapably have to operate mean that achieving the objectives of their Department can never be their primary concern. Anyone who doubts this only has to read the meticulous tracking of paperwork (or non-work) in the Cromien Report into how the Department of Justice shapes up to a task.
Further, although the tribunals have been directed at politicians, they have provided most valuable insights into how this principle is reflected in failures of our bureaucracy to deliver even the minimum performance that could reasonably be expected of it. The Department of Agriculture has been shown up by evidence at the Beef tribunal, Health by Lindsay, Finance by the Dáil Committee on Public Accounts, the Revenue Commissioners by the same committee and the McCracken, Moriarty and Flood tribunals, and so on.
The blunt reality is that public sector employees, who can neither gain nor lose greatly as a result of any outcome, are simply no match for thrusting entrepreneurs who eat, sleep and dream the task in hand, because they can gain, and enormously. This process is visible at its worst in Ireland in the (unfortunately aborted) inquiry into the Iarnród signalling fiasco, as well as from what is known about joint ventures with developers of publicly-owned lands.
So if this escalation of public-private partnership for infrastructure development goes ahead, the public side will provide the capital, and the private one will take almost no risk and carry off obscene profits.
To illustrate, the Programme for Government explicitly designates public-private partnership as the means of achieving a metro for Dublin. The same arrangement for refurbishing the London Underground is expected to deliver up to £6 billion for private outlays (virtually risk-free) of only £70 million. Civil service structures have shown they are incapable of protecting the public interest in public-private deals.
The only criticism of this proposal has been that it is only a means of getting round EU limits on public sector borrowing. This is unimportant compared with the enormous potential for public-private partnership ripoffs.
Professor William Kingston lectures in the School of Business Studies, TCD