Vexed Bermoothes

The PLP’s book of election platitudes includes a proposal to “Expand the use of the Public Private Partnership model for major capital expenditure programmes thereby lessening the burden on the public purse.”

As I said before, the adoption of Private Finance Initiatives (or PFI as they are commonly known) is likely to be a failure of Berkeleyan proportions for Bermuda.

• Bermuda Government is inexperienced in contracting. The major PFI players like HSBC are very experienced in it. Can you guess who’ll get the better deal?
• Few local entities are large enough to take this on; it would mean “selling Bermuda’s assets” to multinational companies. Government may bumble, but at least most of the money stays in the Bermuda economy. With partnerships, it will not.
• Use of outsourcing normally implies corresponding reduction of the Government payroll. Do you really believe that will happen?

PFI were a favorite of Tony Blair and Gordon Brown in the UK, particularly in the health care and education sectors. It is fair to say that the results have been troubled.

• They lead to a very skewed view of Government’s financial health as major projects are moved “off-balance sheet.” It would actually reduce transparency into Government finances.
• Although PFI projects are more likely to be completed on time, their costs are often significantly higher (30% higher according to some studies) over time than if the government had taken on the task itself, often leading to cutbacks in services.
• The PFI partner you start with may not be who you end with, due to the ongoing refinancing of deals.