UNMASKING AUSTERITY: Lessons for Australia, by Dexter Whitfield
This new report, Unmasking Austerity: Lessons for Australia, documents why austerity failed and its disastrous economic and social effects in Europe and North America and highlights why Australia should not adopt these policies. Government debt continued to increase, reduced demand intensified the recession, negative or weak growth prevailed and the private sector failed to invest. The cost of lost output, reduced wealth, mass unemployment and government intervention runs into trillions in any currency. Public spending cuts and closures increased poverty and widened inequality as working people and the poor were made to pay for the failure of the banks, financial markets and wealthy elites. Austerity advocates were equally committed to embedding neoliberalism in the public sector and the welfare state and reconfiguring the role of the state.
Prepared for the Don Dunstan Foundation and Public Service Association of South Australia and published by the Australian Workplace Innovation and Social Research Centre, University of Adelaide.
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A UK PPP Equity Database and a full report on Public Private Partnership is now launched.
High profits and annual returns
The average annual return on the sale of equity in UK PPP project companies was 29% between 1998-2012 – twice the 12%-15% rate of return in PPP business cases at financial close of projects.
Twelve PPP projects had an annual rate of return of over 100% and another 25 had an annual rate of return of between 50%-100%. PPP profits remain unregulated with no profit sharing with the public sector. The excess profit could be £2.65bn, all of which benefits private sector companies.
Equity in 716 PFI/PPP projects (includes multiple transactions in some projects) has been sold in 281 UK transactions worth £5.6bn since 1998. Health and Education PPP projects account for over 60% PPP equity sales between 1998-2012.
Why ownership and control matter
The sale of PPP equity provides new opportunities for profiteering, can invalidate value for money, increases offshore tax avoidance, erodes democratic accountability, increases secrecy and trading of publicly financed assets with significant negative consequences for the future of public services and the welfare state.
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The recent Comptroller and Auditor’s report on the 2011 public service accounts reveals the continuing cost of Public Private Partnerships (PPPs) in Ireland. It provides further evidence that the transfer of risk has been exaggerated and overpriced.
The National Roads Authority (NRA) agreed to traffic-related guarantee payments for the M3 Clonee/Kells and Limerick Tunnel PPPs. The NRA has to pay the PPP company additional money if average traffic levels in any half-year period do not exceed the level of guaranteed traffic in the contract. The Comptroller and Auditor reported significant shortfalls in traffic volumes relative to the guaranteed thresholds in 2010 and 2011 and forecast the additional payment of €6.7m for 2012. Even if traffic continues to increase at an average 2.5% per annum, the government will be paying traffic guaranteed payments for the M3 Clonee/Kells PPP until 2025 and the Limerick Tunnel until 2041! Additional payment could exceed €140m at current prices.
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