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Comments on Public Private Partnerships

Explore the intricacies of PPPs in governmental budgets, fiscal rules, and accountability roles. Understand the impact of accounting methods on deficit indicators and policymaking. Delve into the potential of PPPs as commitment devices and affordability analyzation without revenue effects.

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Comments on Public Private Partnerships

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  1. Comments onPublic Private Partnerships Balázs Romhányi Hungarian Ministry of Finance

  2. Important points in the paper • The PPP-idea is theoretically meaningful • But in practice full of traps • Field of government activity matters • Budget rules and procedures matter

  3. Can we agree on accounting rules? • Main accounting options: • Pure cash flow accounting • Cost of investment up front and service distributed • Full present value up front • Accounting rules have to depend on the role of the deficit indicator • The role is not to measure something but to give politicians the right incentives to run sound fiscal policy Answers • NO, because the economies are different • YES, because politicians are all alike • Further options: ..

  4. Can PPPsbe used as a legitimate commitment device? • Politicians prefer new projects • Social spending is rigid downwards • Politicians only react if there is no room left Answers • Yes it can because otherwise high VfM will be crowded out by social spending • No because two harms don’t make good and it invites lobby groups • Only if: • Full transparency • Stable social preferences (25 years!) • …

  5. Can affordability be analyzed without the revenue effects? • Why do we analyze projects by assuming exogenous growth if the very aim of the projects is to help growth? Answers • YES, because we only compare PPP with pure government investments • NO, but it has to, because • Too much uncertainty • Invites opportunism • NO and NET present value should be calculated • Further options: …

  6. THANK YOU

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