2/10/12

AAA credit rating may fall under weight of P3 debt

The conservative newspaper The Telegraph reports that an economic think-tank, The Integenerational Foundation, has found that the total cost of  British P3s (public private partnerships) has reached such great heights that it is threatening Britain’s AAA credit rating.

The credit rating determines how cheaply the Government can raise money on the international markets. The lower it goes, the more it costs the government to borrow money.

The think tank reports that the P3 debts are £239 billion ($380 million), 80 per cent higher than the report of £131.5 billion in P3 debts released this week by the government in its new "Whole of Government Accounts".

The think tank warned the cost of P3s has been under-appreciated. “Such build-ups clearly put Britain’s AAA credit rating at risk by adding over a quarter to the country’s £1 trillion national debt,” said Angus Hanton, co-founder of Intergenerational Foundation.

Reportedly, P3 debt is up to £13,000 per taxpaying household.

A Government spokesman said the higher figure of £239 billion covers the total cost of P3 repayments. The lower £131.5 billion figure in the government accounts leaves out costs for maintenance, cleaning and other services related to the P3 deals.

David Parker, author of the report and Emeritus Professor of Economics at the Cranfield School of Management, said “It seems clear that decisions made over the last decade or so have been made selfishly. This has involved providing new infrastructure now, while handing down to our children a significant proportion of the costs of provision.”

The  British government conceded last week that a number of P3 hospitals will get a £1.5 billion taxpayer bail-out because of the unsustainable costs of P3 contracts.

Critics of P3s in Ontario and Britain have long claimed that P3s were far too expensive.  Regardless, Ontario continues on with privatized P3 hospitals -- while preparing to slash vital public services with the help of the Drummond Commission.  

Bay Street, at least, will be happy.


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