Will PPP bite Brown?

The news that bailing out Metronet will end up costing us £2 billion points to a significant risk for Gordon Brown - that a failure of the "part-private" sector could leave him nastily exposed. As the chief cheerleader for Public Private Partnerships, Brown is strongly associated with the system of using private contractors to deliver public capital investment, and he's getting it in the neck for Metronet:

Tim O'Toole, managing director of London Underground, said a "great deal of progress" had been made in transferring the PPP contracts. But it is widely expected that an extensive station improvement programme will be delayed as TfL seeks cost savings from the agreements. Metronet had built up a projected cost overrun of £2bn at the time of its collapse, excluding the £1.7bn owed to creditors. A TfL spokesman said priority would be given to the upgrade work on the tube lines, which is considered vital for expanding capacity on an overcrowded network.

Norman Baker, the Liberal Democrats' transport spokesman, said the PPP bail-out was an "appalling waste of public money". "Taxpayers are forking out for this multimillion deal to a failed company to save Gordon Brown's blushes. Just like Northern Rock, the private sector takes the profit when they can, and the public sector bails them out when matters go pear-shaped."

As the economic tightening continues, the danger is there'll be more of this kind of thing. It's been happening on the school rebuilding programme, for instance:

A year ago the programme to rebuild or refurbish every secondary school in England had all but ground to a halt, mired in red tape. Two independent reviews have been commissioned, one by the government and a second by Partnerships 4 Schools, the body running the scheme. Recommendations from the second report, revealed yesterday, should save construction companies £250m which will be passed on to taxpayers.

The length of the bidding process should be cut from 82 to 75 weeks and preferred construction companies be named earlier. The number of preferred bidders should be cut from three to two to reduce wastage. Builders say companies waste millions developing detailed plans, only to lose out at the last minute.

Shadow children's secretary Michael Gove said: "Billions of pounds are being spent but parents and children aren't seeing the results."

And there's the rub. As any fule who's built an extension kno, when you control the contracts yourself the work is harder, but you're less prone to the project grinding to a halt while the contractor buggers off to build a loft conversaion at the big house down the road. If you contract the whole thing out, it might be more convenient, but it carries different kinds of risk.

Written by Lloyd Shepherd on 7 Feb 2008 8:42 AM. Permalink

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