Public-Private Partnerships (PPPs) as tools for privatisation

5 December 2019|

The ODG report “Public-Private Partnerships (PPPs) as tools for privatisation” is a three-part publication that makes an x-ray of the legal framework of PPP contracts in the Spanish State, in addition to studying in depth the case of infrastructure, healthcare and education, placing us in the global framework, explaining the structural causes of this great push of undercover privatisations of our public services and goods, our commons.

Date: 10 October, 2019
Organisation: Debt Observatory in Globalisation (ODG) and PACD (Platform for Citizen Debt Audit)
Theme:
  • Private finance

This ODG report is available for download in three parts:

  1. The legal framework and the case of infrastructure, by Nicola Scherer (ODG) and Rubén Martínez Moreno (La Hidra Cooperativa).
  2. The case of healthcare, by Auditoría Ciudadana de la Deuda en Sanidad (Audita Sanidad) and Nicola Scherer (ODG).
  3. The case of education, by Andrea Paola Galindo Vargas and Nicola Scherer (ODG).

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Following the EU warnings about deficiencies of the Spanish State regarding supervision and regulation of this type of contracts, first the conservative PP government created the National Evaluation Office (ONE) -which did not produce any results- and then the socialist PSOE government, since June 2018, created the Independent Office for Regulation and Supervision of Public Procurement (OIReScon), whose mission is to ensure the correct application of contract legislation and, in particular, to promote competition and combat illegalities and corruption in public procurement. PPPs in Spain fall into the Public Sector Contract Law (TRLCSP) and there is no specific legislation that regulates them. As of today, there are no publications on whether the mandate of the OIReScon regulatory body is being fulfilled, while there are plenty of examples of harmful PPP projects.

PPPs (ODG definition) came into existence in 1992 in the United Kingdom as an accounting trick used to avoid government restrictions on public debt, a feature that remains their main attraction for governments and international institutions. Their use has sky-rocketed with austerity imposition and privatisation policies as a way to balance budgets by hiding debt; they are undercover privatisations.

They are formulas for the private sector to build and manage sectors that have traditionally been in the public domain (such as health, education, transportation, infrastructure, etc.) and facilitate its participation therein. Backed by public guarantees, they transfer the risk to the public sector, and to citizens. Current PPP accounting practices allow governments to keep the project out of their balance sheets (they are not transparent or auditable), since it is the private sector -and not the government- who owns the loan that finances the project.

THE RESULTS ARE OVERWHELMINGLY NEGATIVE AND FEW HAVE ACHIEVED POSITIVE RESULTS FOR THE PUBLIC INTEREST, EXPOSING US TO TREMENDOUS RISKS

  • HIGHER COSTS: they are usually the most expensive method of financing, with high risks and often managed in an inefficient way.
  • DEBT: there is a total lack of information on public guarantees in PPP projects; it is not possible to calculate exactly how much public debt could be created if the public sector has to save a private investment, converting private debt into public (illegitimate) debt.
  • THREAT TO DEMOCRACY, LACK OF TRANSPARENCY AND CORRUPTION: they frequently undermine the right and obligation of the State to regulate in the public interest, they suffer from lack of transparency (with low contract publication rate, poor fiscal transparency, opaque and poor decision-making processes) and have limited public scrutiny, which in many cases leads to increased opportunities for corrupt behaviour. Neither do they guarantee free competition (contracts closed without prior publication).
  • SOCIAL, ENVIRONMENTAL AND GENDER IMPACTS: PPPs can result in human, social, environmental and gender rights abuses, since what matters to the private investor is economic profitability, with a tendency to finance mega-projects with devastating climate impacts, destroying territories and ecosystems, and displacing entire communities, specially in the Global South.

Read more on the ODG website

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