MONEYLENDERS – The Irish Story of Public Private Partnerships

We all know what moneylenders are. They lend you something and then charge you exorbitant interest rates of say 100-200% before your debt is clear. And they all look like thugs, don’t they?

Well, in Ireland, the greatest moneylenders are the financial consortiums behind the Public Private Partnerships (PPP). PPP’s are when a consortium of financial bankers, large developers and speculators bid to undertake development schemes advertised by the Government. So why do I refer to them as moneylenders? Take for example the new Conference centre built in the Docklands under a PPP scheme.


By the time the Taxpayer is finished paying the private consortium behind its development, we will have paid out €713 million. That’s €713 million of our taxes. Or another smaller PPP example is the car park in Beaumont hospital where the Comptroller/Auditor General stated, “ the method of financing the project involved the state in considerable tax expenditure…public finances were worse off by between €9 and €13 million.”

And that’s just on the construction of a car park. Another example is the school procurement projects where the Department reported that, “ the projected cost of one group school scheme was 8 to 13% higher than the traditional procurement methods, despite initial claims that the lifetime costs would be 6% cheaper using PPP’s.”

So why does our Governments, both past and present use the PPP system? The Governments answer is that Private consortiums build and finance the projects swifter and cheaper than traditional public building contracts. Successive Governments even claim they are better value for the taxpayer and involve no financial risk. My research shows a different picture.

Successive Governments have sold us the line that private consortiums can initially build faster and cheaper yet they fail to mention that these consortiums sole aim is to maximize their profits. Any initial savings on the construction phase are completely lost over the entire contract period, especially when contracts have a profit margin of 100%, which is not uncommon. In addition, they fail to mention that the taxpayers are de facto guarantors on these projects as any project collapses will have to be rectified by the Government.

Public Private Partnerships are only a short term political gain for the relevant Government as they appear to produce much needed and necessary infrastructure. In reality they are an unacceptable long term financial burden on the tax payer. In fact, even the dreaded IMF states,“ the off balance sheet status of PPP’s provides a superficial relaxation of budget constraints. It’s superficial because it’s only an accountancy trick and is similar to direct borrowing only much more expensive.”

The British Business Secretary, Vince Cable described PPP’s as,“ a dishonest system of accounting, designed to hide taxpayer’s liabilities”

To the year 2008, Irish Governments have committed us to €3253 million worth of PPP’s for just 19 projects. That is an amazing amount of taxpayer’s money.

We cannot but accept that where private bankers and large developers came into contact with politicians in regard to issues of such enormous wealth, that corruption is involved somewhere. As the Tribunals have shown, political corruption and the bankers and builders that financed it work hand in hand for their own sordid aims. These are the very people who are at the root of our current financial crisis.

And it’s not just our taxes that are being ripped off. One of the greatest downsides to the PPP’s has been the disgraceful treatment of residents in 5 city complex’s whose plans for regeneration were farmed out to private wealthy developers and financiers who then pulled the plug when their planned profit margins dropped. 10 years of broken promises to the residents of O’Devaney Gardens, St. Michael’s Estate, Dominick Street, Sean McDermott Street and Infirmary Road have destroyed communities. Hundreds of families have been left in unacceptable conditions without proper housing and facilities and without any visible hope for their future.

 

Another concern is that Waste, Water and Road PPP’s also lead to an increase in stealth taxes on the public as they are used as an additional method of paying off the enormous long term debt undertaken by the Government.

Another example of an amazing PPP scheme in Ireland is the provision of 3 motorway service stations on our National roads. The Taxpayer has subsidized the construction of these 3 service stations by a private consortium with a grant of €47 million and also provided the consortium with a 25 year lease to run them. You could not make this up.

Unfortunately, In Ireland there has been very little independent research on the success or failures of PPP’s. Interestingly however was the comments from one pro-PPP report which said that as a result of international financiers and development companies being involved “ a negative effect of PPP’s would be the potential loss of work for Irish contractors” (-Redmond 2008). International companies and financiers are involved because of the enormous profits and are causing problems for workers, both Irish or foreign. We all remember the exploitation of the Gama workers. Unpaid wages to increase profits was that company’s policy.


International studies can give us a view of many other countries opinions of Public Private Partnership. A report for the Scottish Government described the PPP system of building hospitals as “ one hospital for the price of two” and the Scottish Education services said that PPP schools cost the state “ 8 to 10% per annum in interest rates, twice as high as direct borrowing”.

In Australia, the Royal Institute of Chartered Surveyors stated, “ where unsuitable uses are made of PPP such as Health and Education, it is much harder to define success performance, resulting in a loss of control by the purchasing Govt. department who then pay a premium for no appreciable benefit”.

In Northern Ireland, NIPSA claims that PPP costs on average 2 to 3 times what the initial investment was over the contract period. That is, a 100-200% profit.

So do all Governments undertake similar PPP’s? It must be noted that the Dutch government takes a different approach to PPP’s. They have much more stringent rules and generate a lot more value for money for the taxpayer. Because the Dutch have reduced the profit margins for the big International investors, more and more projects are being run by local firms, therefore maintaining local employment and equally important, retaining company taxes instead of losing them to an off shore haven.

Of further interest to the Irish taxpayer is the Dutch view on large scale PPP projects. The current Fine Gael Government originally proposed the shelved Metro North project as a PPP, with the Minister of Transport even offering private consortiums a 100 year lease on the system, while not acknowledging that recent similar proposals such as the Metrolink PPP project in London collapsed and will now have to be revived by the taxpayers or the Dutch RUID rail link which involved major difficulties. As a result, the Dutch Audit Commission has clearly stated, “ that PPP projects on these scales should not be undertaken again”

Ireland is in a financial crisis not of the peoples making. The continued use of budgetary conjuring tricks to provide badly needed infrastructure will only continue to add to the long term woes of the taxpayers. If previous public infrastructure developments failed to be delivered on time and within budget, the responsibility should have fallen on the relevant ministers table. Why should the Irish taxpayer have to continue to pay for inept ministers and Taoisigh? Why should the Irish people have to continue to fund ‘Profit, Profit, Profit’ schemes for this is what the PPP’s actually mean to the financiers that have been rewarded with massive contracts for their political patronage.

 

Napoleon Bonaparte:
“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”

Henry Ford:
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”