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Better Regulation of Public-Private Partnerships for Transport Infrastructure

image of Better Regulation of Public-Private Partnerships for Transport Infrastructure

Many governments seek to attract private finance for infrastructure through public-private partnerships (PPPs) in order to maintain investment at the same time as limiting public spending. Experience with PPPs has, however, been mixed. Some transport PPP projects have delivered major cost savings but many more have exceeded their budgets. PPPs are prone to overestimating revenues and when projects run into financial difficulty, risks have a tendency to revert to the

taxpayer.

The report examines the nature of risks and uncertainty associated with different types of PPP project and the practical consequences of transferring risks to private partners. It assesses the fiscal impact of PPPs and discusses budget procedures and accounting rules to limit the public liabilities they can create. The report also reviews the relative merits of tolls, availability payments and regulated asset base models for attracting finance for public infrastructure from private investors on a sustainable basis.

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The fantasy world of private finance for transport via public private partnerships

International Transport Forum

This section reviews the experience of the United Kingdom’s transport PPPs and the financial costs of different types of PPP. It concludes that rail PPPs have not generally been successful in delivering the outputs expected and that road PPPs are costly and as a result have reduced the overall physical volume of road investment. Using the private sector as a financial intermediary adds cost, complexity, bureaucracy and risk that public authorities are unable to overcome. This is reflected in the international as well as British experience. Although a project may fail to transfer risk and deliver value for money in the way anticipated, the scope for enforcement of conditions or dissolution of the partnership is in practice severely circumscribed for legal, operational and political reasons, with the result that public authorities find themselves locked into partnerships.

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