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Blowout highlights need for PPPs

John Key MP
National Party Finance spokesman
19 January 2006

Blowout highlights need for PPPs

The new prisons’ budget blow-out shows why more private sector funding of major government projects is needed, says National Finance spokesman John Key.

He says the multi-million dollar blow-out in the cost of the Waikato and Otago prisons illustrates why the Government urgently needs to change its ideological objection to private sector involvement in major infrastructure projects.

“Public private partnerships (PPPs) are far more effective at imposing underlying cost controls on projects.

“That’s because private capital is involved, and the suppliers of the funds want private sector disciplines on spending because it’s their own money at risk.

“New Zealand is facing an infrastructure deficit going forward – and the outlook is bleak.

“The Government is out of step with other countries in opposing PPPs. For example, Australia has funded projects with such arrangements to the tune of many billions of dollars.

“New Zealand-based fund managers have enormous sums available to invest.”

Mr Key says the infrastructure investment outlook for New Zealand was noted as being “particularly bleak” in a Macquarie Research report released in December.

The report notes that the Government’s purse is unlikely to be able to cope with future infrastructure spending demands, and public private partnerships are an alternative.

“The Government needs to listen to this advice,” says Mr Key. “Otherwise, we won’t be able to afford to build new prisons, motorways or schools in future, and we will see more cost blow-outs like the one this week.”


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