PPP fact of the day

From Patrick Jenkins in FT

Data from Britain’s National Audit Office show volumes peaked in 2007 at £8.6bn, when more than 60 deals were struck, dwindling to virtually nothing in recent years. German enthusiasm for PPP has shown a similar pattern of decline, although the numbers are much smaller — at the 2007 peak, 38 deals worth a combined €1.5bn were done, according to Partnerschaft Deutschland, an advisory group. In 2019, the last year for which data are available, only three deals were done, worth just €66m. Those patterns reflect a mixed verdict on the effectiveness of PPP. The UK NAO has been critical of the value for money achieved on an array of projects since the 1990s.

As I have blogged on several occasions, in the case of developed country governments which have strong state capacity, public procurement should prevail over PPPs unless there are clear efficiency improvements possible. The negatives of PPPs - higher cost of capital, incentive distortions that lead to the likes of asset stripping and dividend recapitalisations - are likely to far outweigh any benefits in case of developed economies. The UK is the best exhibit for this case.