Letter: Ideology of public-private partnerships

OPINION: It's a peculiarity of accounting systems that if one borrows money, promising to repay it over time with interest, that's recorded as a liability.

But if one borrows a physical asset and promises to pay for it over time with interest, it's called a lease and isn't recorded as a liability.

In both cases, the accounts of the lender will record it as an asset.

This is the root of the ideology of public-private partnerships. With these, a government can pretend it doesn't have a liability while incurring greater costs for the future than if it funded the development itself.

An excellent example is the NZ Social Infrastructure Fund targeting an 11 per cent return (BusinessDay, March 16). The cost of setting up and administering the fund and partnership is likely to add another 1 per cent or more to the annual cost, yet the Government can raise money on the bond market at about half this total rate.

It's no wonder advocates of public-private partnerships want to get their shovels into the public purse. What is surprising is that MPs don't seem able to do simple arithmetic on the real situation rather than the oddity of the accounting records.

PERCE HARPHAM

Lower Hutt

- © Fairfax NZ News

Newest First

Oldest First