A scary lack of transparency under PPPs

The National Party’s Associate Minister of Education, Craig Foss, announced a deal yesterday for an outfit called Learning Infrastructure Partners to be contracted under a so-called Private Public Partnership (PPP) to build and maintain schools.

This may be good, or it may be bad. On the general evidence available, it is likely bad. PPPs tend to privatise profits, but socialise losses. As the Green Party’s Education spokesperson, I want to know whether a particular PPP deal such as the one Craig Foss has signed off on will be good or bad for education in New Zealand. Unfortunately, we are not allowed to know – we are told, in an unconvincing interview by Foss, we just have to trust him (MP3).

The problem is section 9 of the Official Information Act:

9.  Other reasons for withholding official information:

(1) Where this section applies, good reason for withholding official information exists, for the purpose of section 5, unless, in the circumstances of the particular case, the withholding of that information is outweighed by other considerations which render it desirable, in the public interest, to make that information available.

(2) Subject to sections 6, 7, 10, and 18, this section applies if, and only if, the withholding of the information is necessary to—

(b) protect information where the making available of the information—

(i) would disclose a trade secret; or

(ii) would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information; or

(i) enable a Minister of the Crown or any department or organisation holding the information to carry out, without prejudice or disadvantage, commercial activities; or

(j) enable a Minister of the Crown or any department or organisation holding the information to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations)

Those provisions allow a Government to decline to reveal almost every detail about the economic case for or against a proposed PPP.  That is totally anti-democratic. It subverts the ability of New Zealanders to submit and lobby on PPP proposals, and it undermines the ability of MPs such as me who are sceptical about the cost-effectiveness of PPPs to adequately scrutinise them.

I would rather we don’t go down the PPP path, because the overseas experience shows they favour the corporate partner’s interests over those of the people. But if we are going to go down that path, as National seems determined to do, surely the Official Information Act needs to be amended to prevent “commercial sensitivity” being used as an excuse for Ministers to hide behind in their refusal to be accountable to those they govern.

18 Comments Posted

  1. nznative says “Everyone should be screaming blue murder about the secret deals being done by our corrupt national government.”

    Ooooh – it’s all a big conspiracy.

    Ever thought of taking something for your paranoia?

    You quote “the public will be left underwriting a process whereby private companies extract profits from the education sector”

    Which smacks of ignorance, conpiracy theory and paranoia all at once…….because of all the new schools built in our region in recent years, EVERY ONE was built by a PRIVATE COMPANY who make a profit.

    Other nearby schools have recently been
    – painted by a PRIVATE COMPANY
    – had alterations done by a PRIVATE COMPANY
    – that electical upgrades done by a PRIVATE COMPANY
    – had drainage work done by a PRIVATE COMPANY
    – had a roof replaced by a PRIVATE COMPANY
    – had playground equipment procured and installed by a PRIVATE COMPANY
    – have bought computers from a PRIVATE COMPANY
    – have bought new furniture from a PRIVATE COMPANY

    The most money savy companies in the country pay professional property companies to purpose design, build and maintain their properties for them.

    But unbeleivably there’s people here who think mums and dads who know zilch about property maintenance are better placed to manage tens of billions of dollars of property.

  2. Everyone should be screaming blue murder about the secret deals being done by our corrupt national government.

    or as Gordon Campbell puts it …” the public will be left underwriting a process whereby private companies extract profits from the education sector, while being given little or no information about what deal (and safeguards) that government has negotiated behind closed doors.”

    The whole thing reeks of back-handers, paybacks and pay-offs to business supporters of the National party.

    Its also a form of deregulation on our education system.

    Just like leaky homes was about deregulation.

    Just like the pike river mine disaster was about deregulation

    …. and now the nats want to try the same thing with our kids …..

    The whole thing stinks

  3. nznative says “A shambles where private companys and no doubt national party backers will get their hands on money designated for our childrens educations.”

    What a load of nonsense.

    We already spend half a billion dollars a year on school buildings. We don’t know where it goes of how it is spent, or if it is spent wisely.

    Now all of a sudden the Greens have been screaming blue murder about transaparency or that it’s “money designated for our childrens educations”.

    It just shows for years you’ve had zero concern for wastage or how well the half a billion dollars a year is used.

    You only have concern for the ideaology.

  4. SPC says “An SOE can provide this for all the public sector”

    That would probably be better than the status quo of inexperienced mums and dads managing billions of dollars of property.

    Or better still, and SOE with private property companies running some schools so there is some healthy competition.

    Because private companies get more money when they are MORE efficient.

    And govt departments get more money when they are LESS efficient.

    No so long ago a family member was criticised by public service colleagues for not using her full allocation of overseas travel, as they were worried they wouldn’t be allocated the same travel budget next year.

    I saw this sort of appalling wastage in the public sector 25 years ago. It’s shocking that this mentality still exists in the public sector today.

    But perhaps not surprising in a public system where efficiency results in lower funding, and inefficiency results in higher funding.

    The incentives are completely the wrong way around.

  5. Why does a specialised property company require provatisation?

    An SOE can provide this for all the public sector.

  6. The ‘leaky building’ shambles was caused by deregulation and trusting the market to do things right. Its cost people their health, their money and even their lives.

    The secret PPP deals the national government is doing are very likely to be another expensive shambles.

    A shambles where private companys and no doubt national party backers will get their hands on money designated for our childrens educations.

    Its just another national party right wing rip-off.

    Follow the money because the rich are shameless at what they will try to steal…….

  7. Gregor say ‘But we aren’t talking private companies here generating profit ”

    That makes no difference.

    It’s about the cost of building and maintaining a building.

    The building doesn’t act differently depending on whether the people using it are making a profit or not.

    We currently have billions and billions of dollars of buildings who maintenance is managed by mums and dads who know nothing about building maintenance.

    It’s absolutely insane.

  8. @Photonz1

    Please read my comment again – I said pre-1989; well before the leaky building sideshow.

    All your examples are commercial businesses. None of them have a mandate to provide a public good. In fact, their sole mandate is profitability.
    So to that end, I’m sure their commercial risk analysis which suggested the outsourcing arrangement was correct and to their P&L and shareholder advantage.

    But we aren’t talking private companies here generating profit – we’re talking public assets providing a public good.

    Furthermore, none of your examples are PPP so they aren’t relevant to the discussion.

    I am in fact suggesting that it makes total sense for specialists to be involved, just within the Ministry as they used to be (and worked rather well I might add) rather than using the very flawed status quo as a figleaf for further privatisation of public sector responsibilities.

  9. Gregor W says “Surely rather than becoming involved in a potentially risky commercial proposition”

    What about the risk of the taxpayer being stuck with a bill of hundreds of millions to fix up the hundreds of schools that leak?

    Or the millions each year spent on ongoing repairs and maintenance to buildings that were built for a price, rather than to last.

    ANZ, Westpac, BNZ, ASB, Ford, Coca Cola, Panasonic, DHL, IBM, Steel and Tube, Office Max, Courierpost, Pak n Save, Countdown, Warehouse etc – have ALL recently got new buildings purpose-built SPECIFICALLY to their needs, but have paid a specialist property company to design, build, OWN and maintain them.

    If it is such a bad idea to get a specialist property company to build, own, and maintain your buildings, why are our most successful companies doing exactly that?

  10. @photonz1

    So how will better maintenance of buildings, and a stronger focus by boards and principals on education, be detrimental to childrens education?

    Though I agree with your statement, is a PPP the right prescription?

    Surely rather than becoming involved in a potentially risky commercial proposition, the MoED could roll back the clock pre-1989 and develop some skills in-house around tenure management and property acquisition / maintenance contracts rather than merely providing guidelines around “designing learning spaces”.

    It’s a failing of sensible central government accountability and planning rather than a justification for further privatisation.

  11. PPP’s supposedly provide everything that we expect from state education.

    But with profit built in for the private owners.

    And the risks get carried by the public.

    Bad PPP’s are a Disaster and a rip off.

    with the national government negotiating in secret we stand a very good chance of getting ripped off ………

  12. sprout says “If National truly supported a quality public education system, they wouldn’t treat ours with such disdain!”

    What things about education change with a PPP?

    The teacher doesn’t change.
    The curriculum doesn’t change.
    The board has MORE time to spend on educational matters.
    The principal doesn’t have to waste over quarter of his time (the average in NZ) on building issues.

    So how will better maintenance of buildings, and a stronger focus by boards and principals on education, be detrimental to childrens education?

  13. Brent asks “I mean seriously, what the hell is a corporation going to do with a school to make money from it? ”

    They make money by
    1/ Making sure it is built well, and to last – unlike the 143 leaky schools we currently have that will cost the taxpayer hundreds of millions to fix.
    2/ Making sure it is professionally maintained – unlike many schools whose boards of trustees don’t have even a slither of experience in building maintenance.

    How many boards even know, let alone have planned and budgeted for, large maintenance projects that will be required in 5, 10 and 15 years time?

    Currently we have people who know absolutely nothing about property maintenance or property manangement, and they are in control of looking after tens of billions of dollars of educational property.

  14. As far as I am concerned, our childrens education is far too much of a risk to be trialling PPPs with. Do it with roads, telecoms, even prisons to some extent – things that work overseas and should work here, but schools? Thats way too close to home for this chicken.

    I mean seriously, what the hell is a corporation going to do with a school to make money from it? Charge lots of rent? Massive after school activities? How can any of this be good for us or our kids?

  15. I’m not terribly in favour of rushing headlong into PPPs, but I do have some direct experience working as part of he supplier side on a PPP in the UK in the early days of PPPs.

    Although ultimately it didn’t work out as intended, you could never accuse the supplier of not putting in the effort and the money necessary to try and make it work. They lost shedloads on the deal. However, the experience enabled both the supplier and the government clientto have a better understanding of the issues for subsequent PPPs.

  16. I do have difficulty with the fact that private interests can build schools cheaper than the state and yet still find the process profitable. If the buildings are owned by private interests the only way they can make money on them is through charging for the extended use of the buildings outside school hours. Overseas experience has shown that the teachers and children using these schools are often inconvenienced through the need to operate in classrooms that have multiple uses.

    The owners of the buildings earn income from rental and then at the end of 25 years they make a windfall as the state buys the buildings that are probably near the end of their life and will need considerable reinvestment. Even Treasury’s own investigation into PPPs found there is little to be gained by these arrangements and that any deal had to be very robust to protect the interests of the state. National does not have a good track record in protecting the interests of other than business.

    State built schools are a shared asset that can often be used by the local community at no charge and there is often a lot of community goodwill involved in maintaining them. Craig Foss claimed all will be revealed in due course, probably well after National has left the government benches.

  17. Another key issue is what happens after the 25 years is up. Does the school building then pass 100% into government ownership at no cost, or does it remain the property of the private company. If the latter, then after 25 years when the school is well and truly established and a part of the community, the private company can then demand much higher ‘rent’ to retain the school in its location. The government then looses the ability to control its assets when they are privatised, and this is just another example of this, and it can mean that we end up paying more in the end (after all you don’t get something for nothing Minister).

    We need transparency to make sure that at the VERY minimum that this company isn’t going to have tax payers over a barrel after 25 years because of this deal.

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