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Public Private Partnership – Comparative Issues in the UK, Germany and Austria

Public Private Partnership – Comparative Issues in the UK, Germany and Austria

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Ronald W. McQuaid and Walter Scherrer, Public Prívate Partnership Comparative Issues in the UK, Germany and Austria. Paper for the International Public Prívate Partnerships Conference University of laşi, Romania,
Ronald W. McQuaid and Walter Scherrer, Public Prívate Partnership Comparative Issues in the UK, Germany and Austria. Paper for the International Public Prívate Partnerships Conference University of laşi, Romania,

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Categories:Types, Business/Law
Published by: Saúl Suárez Flores on May 06, 2012
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Public Private Partnership – ComparativeIssues in the UK, Germany and Austria
Ronald W. McQuaidEmployment Research InstituteNapier UniversityCraiglockhart CampusEdinburgh EH14 1DJUKr.mcquaid@napier.ac.uk+44 (
 
0)131-455-4310Walter Scherrer Department of Economics and SocialSciencesUniversity of SalzburgKapitelgasse 55010 Salzburg, Austriawalter.scherrer@sbg.ac.at+43(0)662-8044-3705Paper for the 11
th
International Public Private Partnerships Conference,University of Iaşi, Iaşi, Romania, 25-27
th
May 2005
Abstract
While the UK has been a leader in the large-scale introduction of publicprivate partnerships (PPPs) across the economy, both Austria and Germanyhave been relative latecomers within the recent move towards PPPs. Thispaper analyses the issues driving PPPs and in particular it compares theexperiences in Austria, Germany and the UK. The major of motives fomoving towards PPPs are macro-economic or budgetary, especially inGermany and Austria, but also micro-economic or improving the efficiency of public service delivery, especially in the UK. The paper then considers theimposition of constraints on policy decisions by PPPs and analyses thepotential macro-economic, including the implications in terms of the tax toGDP-ratios.
1
 
1. Introduction
 Although Public Private Partnerships (PPPs) have had a long history in manycountries, it is only in the last two decades that they have become significantin the provision of services to the public. The motivations for, and types of,PPPs have varied over time, across sectors and between countries (see for example the European Community’s Green Paper on PPPs, 2004). In thispaper the term PPP will be restricted to those projects involving the privateprovision, but continued public funding, of services formally provided by thepublic sector, although it is recognised that PPPs may include other forms of partnership.Historically both Germany and Austria have had experience with public andprivate sector partnerships dating back to at least the 19
th
century (e.g. theconstruction of parts of the Austrian railroad network by PPP) and morerecently in the second half of the 20
th
century (e.g. key urban developmentprojects in Germany in the 1980s). Nevertheless both countries have beenlatecomers within the recent PPP-movement (compare: Bastin (2003) andBeirat (1998) for Austria; and Friedrich Ebert Stiftung (2002) and Sack (2003)for Germany). However, the overall amount of investment has been verylimited, notwithstanding a few large investment projects (e.g. the heavy goodsvehicles toll systems which have been deployed, more or less, successfully inboth countries) and several smaller projects (see the survey by Schaffhauser-Linzatti 2004).The UK has been a leader in the large-scale introduction of PPPs across theeconomy. The UK government considers PPPs “to cover a range of businessstructures and partnership arrangements, from the Private Finance Initiative(PFI) to joint ventures and concessions, to outsourcing, and to the sale of equity stakes in state-owned businesses” (Treasury 2000, p. 8). They set outthree main categories of public private partnerships concerning ownership,provision of services (including infrastructure) to the public sector, and theselling of public sector services to others (such as through the exploitation of patents).
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First, there is a changing public ownership where PPPs are concerned withthe introduction of private sector ownership into state-owned businesses. Thisinvolves a range of possible structures including a stock market flotation or the introduction of a strategic partner and with sales of either a majority or aminority ownership stake to the private sector. Hence this can be seen as acontinuation of the privatisation philosophy of the 1980s and 1990s introducedby the Conservative Thatcher government after 1979. The second form of PPP concerns the provision of and/or operation of infrastructure. The Private Finance Initiative (PFI) and other arrangementswhere the public sector contracts to purchase services on a long-term basisso as to take advantage of private sector management skills and providing anincentive by having the private finance that is contributed at risk. This type of PPP includes concessions and franchises, where a private sector partner takes on the responsibility for providing a public service, includingmaintaining, enhancing or constructing the necessary infrastructure (e.g.many school or hospital investments or, in transport, the Skye Bridge).Basically such PPPs may be classified on two continuums with different levelsof ownership and involvement of: who operates the service; and who providesthe facilities (building and/or equipment etc.). PPPs may involve build andoperate schemes (where the private sector both builds a facility and operatesit for a defined period, such as 30 years, before handing it back to the publicsector); to purely operating a service, while using public sector facilities; toproviding a private sector facility, to be operated by public sector staff. Insome cases the private firm may sell on their interests to other firms with amarket for aspects of the ‘second phasesof PPPs being developed incountries such as the UK.The third type of UK PPP is generating commercial value from public assets,such as selling Government services into wider markets and other partnershiparrangements where private sector expertise and finance are used to exploitthe commercial potential of Government assets. For example innovationsresulting from defence research may be exploited through a joint PPP.
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