The appalling Grenfell tragedy, followed by the collapse of Carillion, the profit warnings and challenges faced by Interserve and Capita, and the rough ride for the Haringey Development Vehicle, have brought concern about major infrastructure developments to the top of the practical and political agenda.
The policies of the official Labour opposition best illustrate the political consequences. Renationalisation of the utilities and rolling back all public-private partnerships seek to install ‘the state knows best’ as the operating principle.
Of course these issues have always been controversial but at the moment there is a definite sense in all sectors that they are becoming more acute and challenging.
In considering this it is important to get two things quite clear.
First it has never been the case, as some ideologues want us to believe, either that private is good and public bad, or the reverse, that public is good and private is bad.
Even if it were desirable, it is never possible to remove the private from public provision short of the wholesale establishment of a Soviet-style command economy in which every form of production of anything is owned and controlled by the state.
Similarly the public interest can never be removed from private projects. The form of public interest ranges from wholesale ownership through intrusive regulation to an assortment of legal requirements such as those dealing with health and safety, tax, fraud and financial reporting.
The second conclusion flows directly from this. The important issue is how to make the partnership between public and private work best.
And here those recent events show that we clearly need to do a lot better. We should not abandon private involvement in public interest projects or, at the other extreme, leave it all to the markets. We have to make working together work better and to eliminate the sometimes very serious problems which have occurred.
We need to examine and revise our practices. Everyone involved, whether in the relevant professional disciplines, in business, in politics or in national or local government needs to find the best way to improve what we do.
The legal forms of partnerships and co-operation must be got right. There have been different and evolving kinds of public and private partnerships (PPPs), various forms of Private Finance Initiative (PFI), diverse types of joint venture (JV), and new ideas such as Sovereign-style wealth fund co-operation and a “New Social Contract”.
Some of these approaches have dramatically accelerated investment in important social benefits, such as schools and hospitals, which otherwise simply would not have happened. All present difficult challenges to implement.
The starting point is to deal with the Government / Office of National Statistics balance sheet issues which have distorted some public decision-taking. The often contorted processes which have been followed in order to keep certain spending “off balance sheet” have delivered little public benefit.
Every public / private partnership agreement should be open and transparent and should require both parties to commit to:-
Putting the interest of the citizen at the core;
Establishing explicitly the partnership’s social and moral purpose;
Sharing risk fairly and transparently;
Treating workers properly, and not simply cutting standards, for example with proper employment contracts, pay and training, pensions and trade union recognition.
Making strong agreements for future maintenance (an under-appreciated strength of PFI)
And in general public and private partners both need to perform better.
The public side needs better quality commissioning, on the basis of both quality and cost; higher quality staff and better political commitment; full scrutiny of private contracting partners including encouragement of genuine markets and avoiding reinforcing oligopoly.
Auditing should be strengthened as should the public reporting roles of the Financial Reporting Council, National Audit Office and the Public Accounts Committee.
And private contractors need to avoid overreach and working across too many markets, too much complexity. acquisitions to drive growth, risky international commitments and vulnerable supply chains.
Both need to take their decisions on a long-term not short-term basis.
Recent events mean that the agenda is challenging but it is time to engage with genuine public concerns in order to recreate public private partnerships as the best way to build powerful mechanisms for achieving social progress
Rt Hon Charles Clarke