COMMENT 125

Public Private
Partnerships
here is strong support across the political spectrum for public funding of core services

T such as education and health care. However, public funding need not necessarily imply
public provision. In practice in most publicly funded services there has long been a mixed
economy of providers. This mix is becoming richer as governments strive to improve the
efficiency and responsiveness of public services.
In September 1999, the IPPR established a Commission on Public Private Partnerships
(PPPs) to explore this emerging landscape. Accepting the principle of universal funding and
access according to need, how might governments foster a greater diversity of provision in
the public services?
The first pre-requisite is for Government ministers to have a clear idea about why they are
in favour of PPPs. From the start policymakers have been confused in the way they have pre-
sented the case for partnership. They have argued, wrongly, that PPPs allow more investment
to take place in the core public services. They have argued more persuasively that PPPs could,
by fostering competition and a greater diversity of providers, deliver more efficient and respon-
sive public services.
The Chief Secretary to the Treasury, Andrew Smith MP, helps to set the rationale for PPPs
straight. The focus is solely on improving value for money by bringing in commercial exper-
tise to manage complex programmes of investment. He also makes clear the government’s
commitment that all projects should be subject to post-implementation evaluation.
The Secretary to the IPPR’s Commission on PPPs, Gavin Kelly, emphasises that the lack
of publicly available data on the amounts of expenditure going through partnerships makes
it difficult to estimate the order of significance of PPPs across different areas of public service.
However, he also argues for the potential of PPPs not just to act as a spur to cost-effectiveness
but as a way of applying upward pressure on public sector providers to be more transparent
and responsive.
Chris Nicholson outlines some options for the wider application of PPPs within health-
care. So far the constrained use of the Private Finance Initiative within the NHS has delivered
marginal value-for-money. He argues for properly managed pilots to explore the potential
for PPPs aimed at breaking down barriers between different services within the NHS and inter-
nal demarcations of labour.
Rachel Lissauer points to the wide disparity in the type of education initiatives given the
label of ‘partnership’. She makes the important point that the statutory responsibilities and
rights of Local Education Authorities have remained intact despite headlines that private sec-
tor involvement in education signals a ‘removal of council control’.
The IPPR Indicators section points out that the PFI is actually rather small beer in the con-
text of overall levels of publicly sponsored capital investment, which even with the PFI will
be lower as a proportion of GDP in the middle of this decade than in the early 1990s. The sec-
tion also explains why the PFI is not necessary to satisfy the Government’s fiscal rules and

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126 NEW ECONOMY

why it in no way relaxes the constraints faced by the state in funding public services.
Paul Thompson notes that the involvement of the private sector in the running of prisons at
first sight looks very contentious. However, this appears to be one of the few sectors in the UK
where there is some evidence of modest gains in efficiency, without any clear adverse effects on
the quality of provision. One real benefit is the creation of a competitive environment that has
stimulated the public sector to raise its game.
John Hawksworth outlines a coherent set of principles against which to judge the Gov-
ernment’s approach to the public enterprises such as the Post Office, London Underground
and the National Air Traffic Services. The latter two are to become ‘Public Private Partnerships’.
He argues it is possible to reconcile the Government’s approach in each case, but as with pri-
vatisation, it will be ten years before a definitive judgement can be made about whether the
solution for each of these enterprises is the optimal one.
Barbara Ainger puts forward a case for a pilot to establish a ‘Neighbourhood Regenera-
tion Company’ – a form of partnership that would take charge of all the public assets in a neigh-
bourhood with the aim of securing the most efficient use of those assets in delivering
‘joined-up’ public services. Although many technical hurdles and no doubt some political oppo-
sition would need to be overcome to achieve this, it might allow the answering of such ques-
tions as whether a primary school could also be the best place to site a new health centre.
Tsjalle van der Burg and Wilfred Dolfsma outline an innovative plan for public museums
and private financial companies to come together to establish Partnerships for the arts. Pri-
vate finance would be used to acquire art for public display on the expectation that the value
of the acquisitions would appreciate, to the benefit of both parties.
Elizabeth Michielsens, Len Shackleton and Peter Urwin note that private employment
agencies have long played a greater role in the UK than in most of the rest of Europe. They
are now heavily involved in Partnerships for the delivery of public employment programmes
such as the New Deals. However, although private agencies have a lot of experience in deal-
ing with certain client groups, hard-to-place and less motivated jobseekers present a challenge
beyond those normally faced by the private sector.
As Lisa Harker points out childcare is one area where public funding has increasingly been
used to help people buy private provision, a trend that the new childcare tax credit will rein-
force. However, despite the extra resources made available through the Government’s nation-
al child care strategy there is so far little sign of a significant response from the supply side.
Chris Hewett argues for giving equal weight to a target to improve environmental pro-
ductivity alongside the more conventional Treasury focus on labour productivity. As with green
tax reform, a green spending reform is necessary, cutting support for resource intensive and
polluting activities and increasing it for sustainable practices.
Finally, Tom Palley argues that recent debates over reforming the international financial
architecture have focused too much on the structural failings of developing country financial
markets, ignoring the fact that industrialised country financial markets have been a signifi-
cant source of trouble. He sets out the case for a system of Asset Based Reserve Requirements
as an additional tool of policy for regulating the domestic economy and preventing lenders
in rich countries contributing to the crises in poor ones.
Peter Robinson
Editor