Gordon Campbell on gender posturing and mis-using PPPs in public health

dff0b6ff70829f4a4399What is it with right wing politicians getting standing ovations for doing the bare minimum? As in… Florida governor and presidential hopeful Ron De Santis being acclaimed for picking the kids up from school while his wife was receiving chemo treatment for cancer. Wattaguy, right?You can see the clip here.

Closer to home, Tara Ward did a great piece in Spinoff this week, riffing on Sam Uffindell’s parliamentary speech in June about how… once a month, Uffindell gives his wife “a break” by going into a supermarket armed with a shopping list she has written and bringing stuff back home. Amazing. Although, Uffindell smirks, it’s also good advertising for him to be seen by the public doing ordinary stuff while wearing his National Party jacket.

These monthly forays, Uffindell indicated, keep him in touch with ordinary people, some of whom – who he knew – are doing it hard. It also keeps him aware of prices for food and groceries. Why, he recently found out it costs $20 for a 1kg block of Mainland Tasty. Great cheese, but at that price? No way. Uffindell says that he put it back and went for a cheaper block of Colby instead. (That backbencher salary of $163, 961 only goes so far.) Some people, Uffindell added, have to go without cheese altogether. Imagine that.

That’s Sam Uffindell, folks. Regular bloke, helpful husband … Well, about 12 times a year anyway, when his wife has earned a break from her chores. You can find Uffindell’s speech to the House right here. 

Peddling PPPs

Now that a change of government is on the cards, the centre-right is dusting the cobwebs off its policy wish-list over the past 30-40 years. At the current rate, education vouchers and bulk funding for teacher salaries can’t be far away. Education standards will surely rise if teachers can be pitted against each other for a declining pot of money.

In the meantime, the centre-right is talking about putting the profit motive front and centre of the provision, management and upgrades of hospital facilities. It aims to let public private partnerships loose in the public health sector. The ACT Party thinks this would be a great idea, a “no-brainer” even:

PPPs would be used for the refurbishment and upgrades to existing facilities, and would be converted to long-term lease-backs,” ACT said in a statement to RNZ

To that end, ACT ct would do deals “with large, reputable global infrastructure investment groups.” Labour flatly opposes using PPPs to build and manage public health facilities. During the run-up to the election, National is being coy on the subject. Here’s what National’s infrastructure spokesperson Chris Bishop recently told RNZ:

“We’re supportive of working with private partners like ACC, the Superannuation Fund, KiwiSaver funds, or other investors, where it makes sense – but we have no specific plans for private funding for hospitals or other health infrastructure at this stage,” said infrastructure spokesperson Chris Bishop. “We expect the Crown will be committing capital for our two major health commitments we’ve made so far – fully funding Dunedin Hospital and delivering a third medical school.”

National and ACT may not be at cross purposes on this issue. After all, Bishop’s “We have no specific plans… At this stage” isn’t very reassuring. No point though in frightening the voters until the election is out of the way, right?

PPPs and Health

Boomers offer the private sector a golden opportunity. Meeting the health care needs of an ageing population will require fresh investments in frontline staff, hospital facilities, and new pharmaceuticals. In all the planning, contracting, building, monitoring and delivery phases, there will be so many ways to turn public need into private profit.

The global experience with PPPs – in health, transport, roading etc – gives little reason to think the private sector would be any more efficient than central government. In fact, PPPs would inevitably (see below) be a more expensive form of service delivery, over the long run. The Transmission Gully roading project for instance, was one of this country’s most recent experiences with PPPs. The litany of delays, cost overruns and contractual wrangles make it a poor advertisement for PPPs ever being the ideal answer to the health system’s prayers.

What exactly is a PPP? In brief, it is a mechanism by which private companies get to fund, build and manage the capital projects that central or local government has contracted them to provide. The state agency or local authority are then on the hook (typically, for the next 30 years) for making annual repayments – which are called the ‘unitary charge’ – to the private sector provider.

Two basic problems are embedded in this model. For starters, the unitary charge adds a layer of investor profit to the cost structure. That profit layer would not exist if the government agency or local authority had paid for the whole thing themselves out of a combination of borrowing, taxes and/or rates. Secondly, and adding further to that cost, it’s axiomatic that the rate of borrowing the necessary funds will be costlier for the private provider than the rates available to central government. Those additional interest rate costs will then be baked into the overall cost of the project.

On overseas experience, these two additional costs alone – let alone any fish-hooks created by loosely worded contracts – mean that the project eventually ends up being significantly more expensive for the taxpayer/consumer footing the bills.

What’s the big attraction?

It is pretty obvious why the private sector likes PPPs so much. PPPs offer big corporations a guaranteed income stream over and above the actual costs, for decades to come. Plus, PPPs offer plenty of opportunities for the unscrupulous to put their finger on the till – starting with claims that added compensation is merited, to insulate private providers from the alleged (and often illusory) risks posed during the construction phase.

But why do politicians find PPPs to be so seductive? One reason is that they can make the government accounts look better. Instead of the government borrowing the money and this liability sitting openly on the books, the project numbers can be shunted off elsewhere. Crucially, PPPs also mean the real costs can be spread out over time, across many election cycles. Thereby, several projects can be initiated at once, without looking quite so much like a lavish spendup is under way.

True, voters may have eventually saved themselves a ton of money if government had actually picked up the entire tab, but by then, the politicians responsible for the extra cost burden will have long departed the scene. Since the payments involved are spread out over time, voters might not even notice just how much more they’re paying over the entire duration of the PPP contract.

In that sense, PPPs are like a mega-version of the “buy now, pay later” form of hire purchase. Yet given the looming costs of public healthcare, surely we shouldn’t be trying to build and refurbish our hospitals and other essential health facilities, on tick.

Footnote: The devil lies in the PPP contract detail. What, if anything, is to count as a legitimate cost over-run? What is to count as an acceptable standard of service provision? What is to count as an unavoidable delay, and what sort of penalty regime can be triggered under what conditions that can be sheeted home in court to the private provider etc.etc.

It remains unclear whether the government’s negotiators are willing or able to foresee the necessary protections, and ensure that they’re put in place. Te Whatu Ora is doing its best:

A nationally consistent approach to business case development and the use of agreed design guidelines across the country, will provide consistency and efficiency.”

Or so we all hope. As RNZ said, the key decisions on PPP projects and contracts will be run past Te Whatu Ora’s new Capital Investment Committee, which – as RNZ added – is to be comprised of a lawyer, a consultant, a property company boss and a former National MP, Amy Adams, plus the agency’s chair.

In reality, how effective can that committee be in protecting the public from the intrinsic flaws in the PPP model? There will be political pressure to minimise the delays. In practice, the committee may function morel like a rubber stamp. After all…one imagines that only a certain amount of push-back by the committee would be tolerated, especially by the business-friendly pushovers in a National/Act government.

Revivals, Re-imagined

The Asheville, North Carolina musican M.J. (Jake) Lenderman released his “Knockin” single this week, a track that was reportedly inspired by watching this video of the golfer John Daly doing his own rendition of the Bob Dylan chestnut “Knockin On Heaven’s Door.” Life is a fairway, with a putting green waiting at the end of it all.

Talking of musicians from Asheville N.C. here’s River Whyless with their very pretty “ All Of My Friends” track from last year: