Supporters and opponents of a fund being set up to build public infrastructure are pointing to the performance of similar moves overseas to support their arguments.
HRL Morrison & Co yesterday said its Public Infrastructure Partnership Fund (PIP Fund), with an initial investment capacity of up to $500 million, was an important new development for this country.
The fund would focus on developments such as schools, student accommodation, social housing, hospitals and other medical facilities.
Typically the PIP Fund would be paid by a government partner for financing, building and managing facilities for 25 to 35 years, after which the facilities would be transferred to public ownership.
Morrison & Co chief executive Marko Bogoievski said the model was proven overseas. A spokesman for Finance Minister Bill English said the weight of international evidence showed public private partnerships (PPPs) could produce economic gains.
They had a successful history in Australia and Britain where they had been operating for more than 20 years.
"While there have been a small number of failures in the UK this has to be seen in the context of several hundred projects carried out," the spokesman said.
"In Australia every state has utilised PPPs. As a result Australia has a deep and well performing infrastructure sector and we would like to see some of that replicated in New Zealand."
The Government was open to working with the private sector where it could get better value for money for taxpayers, and the Morrison & Co fund was one proposition among others where groups had indicated they were willing to help.
But Public Service Association national secretary Richard Wagstaff said British taxpayers knew the cost of being locked into the kind of long-term leases proposed by Morrison & Co.
"They're paying to maintain a PPP-built school, for the next 18 years, even though it closed last year. That school, in Northern Ireland, shut because it's no longer viable ... but UK taxpayers will have to continue paying a million dollars a year for its maintenance until 2027," Wagstaff said.
"PPP-built hospitals in Britain are also in trouble because they're locked into crippling long-term contracts with private companies. Two London PPP hospitals were declared technically bankrupt in 2005."
One was Queen Elizabeth Hospital in Woolwich which opened in 2001, but four years later was insolvent because it was locked into a 30-year contract it could not afford. It had to pay $49 million a year, $22 million more than if it had borrowed the money from the government.
Wagstaff saw the Morrison & Co fund as "another part of the Government's privatisation agenda".
A commitment in principle of up to $100 million to the PIP Fund has been made by the Guardians of New Zealand Superannuation.
General manager of private markets Matt Whineray said the investment suited the Superannuation Fund's long term investment horizon.
- NZPA
Battle lines drawn on infrastructure fund
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