May I make two suggestions to Professor Blakely and other readers in order to view this problem in a new, more realistic light?

1) Go to the nearest video/DVD hire store and grab a copy of "The Corporation". After viewing this excellent film one will be left with no doubt about why corporate power is always used for the benefit of the already wealthy and not for the average Jo Bloggs no matter what safeguards are installed. If the rules don’t benefit the wealthy elite they just get them changed.

2) Grab a copy of "The End of Suburbia" the film that clearly demonstrates that the age of cheap and abundant oil, thus road traffic, among other oil or other fossil fuel dispensed utilities, including most of our food production, is almost over.

Peak oil, is gunna change everything and governments world wide and locally have no plan B for this obvious impending crisis that will be as serious if not more serious than global warming.

Professor Blakely may be standing just a little bit too close to the blackboard, like many other too narrowly focused professionals, or those who rely on funding from the public purse or the corporations. He may be unwilling or not able to look at the big picture.

“Peak oil” - Google it - its gunna change everything.

Prof Blakely draws an analogy with PPPs and chattel leasing. Elsewhere he says that investors don't want to take the risk. In a chattel lease the risk is shifted to the lessee and away from the owner. In a PPP the risk is shifted almost entirely away from the investor (as noted) and on to government. It's worth the reminder that government is US, the taxpayers. We end up bearing the risk.
PPPs are laregly tax-break driven anyway. So taxpayers are in a lose-lose situation. They lose a third time if, as has been the case on tollways and the Aiport rail in Sydney, the PPP is overpriced. PPPs enable governments to retain their AAA credit ratings at the expense of taxpayers. A modest amount of public investment would be a vastly more equitable way to fund much-needed infrastructure. The Commonwealth Government surplus could be trimmed to provide benefits to those who have contributed it.
PPPs have been made fashionable by the globalised finance sector. They are of great benefit to it but precious little to anyone else. A debate on public finance and the national interest is required, not a narrow focus on the tax system.

It is disgraceful that someone who claims the title of Professor should mount this argument. The safeguards he proposes should occur whatever the source of funding. All things being equal large infrastucture projects can be funded much more cheaply through government borrowings at the much lower interest rates which governments can command. To argue that P.P.Ps just need the safeguards (which we used to have but which were removed at the request of the private investors) to be successful, is to ignore the main point which has been proven many times. PPPs cost more because their borrowings demand a higher interest rate than Government borrowings. It is intellectual dishonesty to pretend otherwise.

This article is complete nonsense. There is not really any problem with the Cross City Tunnel. It is well built and the tolling works well and 30,000 motorists are prepared to pay $3.56 each way to use it.

The problem is with the Iemma Labor Government. It agreed to reduce the capacity of one of the busiest roads in Sydney in return for a large cash payment and I believe this is an act of corruption. The road was built with public money and is heavily utilised. There is no reasonable argument for closing it.

The author’s suggestions about private schools are equally implausible. His idea that private schools should not be allowed if they discourage enrolments in nearby public schools would be incredibly unpopular.

Maybe he should consider the concept of Freedom of Choice. Maybe the tunnel doesn’t go where the motorist wants to go. Maybe they can’t afford the toll. Maybe the local government school has become rundown and parents don’t like it.

Government by coercion was the theme of both the Soviet Union and Nazi Germany. It has no place in Australia.

In my experience problems with PPPs include government being more interested in the “announcement” effect than the long-term net benefits of the project; and that those negotiating on the government side both lack the necessary contractual skills and have lower incentives to get the deal right than do their commercial counterparts. Both these factors tip the balance away from the public benefit towards the private benefit.

As for the government “improving the fees by closing off alternative routes,” etc, it is hard to see how such sweetheart deals which reduce competition will ever be in the public interest. I’d like to see the cost-benefit analysis of the Sydney tunnel.

The “four simple actions” you propose would clearly address the above issues. However, in my experience State government politicians would never set up a truly independent board, would never relinquish their capacity to meddle if they see a potential political gain from doing so. As for long-tern strategies, few politicians work to such horizons.

PPPs were under consideration when I joined the Queensland PS in 1991. To date there is one in place, the Southbank TAFE, which concerned insiders tell me was a dog.

That said, I support the concept as a general principle. There will often be potential advantages in having infrastructure built and operated by the private sector. Queensland has just gone the other way however, with government-owned Queensland Rail buying a national freight network. Premier Beattie said that “If QR is to survive, prosper and continue to contribute healthy dividends back to Queensland taxpayers, it must look beyond traditional state borders.” Given that QR’s latest (and better than usual) return on assets of 6.7% is well below the 9.5% standard weighted average cost of capital for companies with similar capital structure, one might well argue that Queensland’s taxpayers would be best served by selling QR and investing the money where higher returns are available.

Bull, the cost of finance depends on the attached risk. Government borrowing costs are fairly low on average because most of their activities are fairly low risk. When engaged in risky activities such as the tunnel, they need to apply a similar risk premium to the private sector.

The potential benefits of PPPs include drawing on the greater expertise and greater incentives for efficiency of private sector financiers, builders and operators. The problem is the limited capacity of goverments and public servants to negotate and monitor apropriate contracts.

Dear Edward,

If the baby has drowned it needs to be buried, not thrown out. Cliches are trite and meaningless.

As to your 4 point master plan :

1 -Who appoints the "independent boards"? Non independent governments. Go back to Yes Minister and give us a thesis after you've seen the whole series. What you suggest is a paper plan that fails as soon as politicians take over regardless of intent.

2 - External contractor? Get into the real world Edward. That doesn't happen. Even if they make it look external the reality is usually the opposite.

3 - Who sets up this emergency fund? The taxpayer who has paid for the existing roads, bridges and more and is now being taxed all over again for a tunnel on a road they own. If this is a simple rule surely this excludes the need for a PPP at all. The fund could be used to build the tunnels etc. and that fund of course consists of taxes paid by taxpayers.

4 - Part of a long term strategy? Do you understand how government works at all? One term is the longest planning and that is usually too much for our fabulous leaders.

PPP's are simply a way for politicians to sell public property to their mates, usually those mates hire the politician when they retire with all that superannuation. You call it a lease. The facts are the opposite. Wherever tolls have been introduced, they stay regardless of changes of ownership.

If we must have toll roads we don't need to employ people to collect cash for much longer. Heard of Etags?

Very little can go wrong? There was a movie called "West World" where that claim was made and the results are exactly what we get.

I don't know what your area of expertise is but it surely isn't the area you have written about. Were you paid to write it, and by whom please?

Australia Carnivale.... 1/- a go.

These are surely the basic ingredients of a road:

1. A ribbon of land.

2. Quantities of rock, gravel, tar macadam and concrete.

3. Big yellow machines operated by technicians, guided in their course by engineers and surveyors.

4. Loads of petrol and diesel.

5. A lick o' paint.

All else is superfluous.

* * *

Yet before a prospective road can support even a single tyre, it must first sustain a swarm of locusts, who stand at the head of the queue with very deep begging bowls indeed. It is a measure of how completely Australians have been "civilised" by the new economics, that they swallow this twaddle without question.

The first and most fundamental PPP is the one struck between every Australian and his/her government! Will someone please remind our politicians of that?

No doubt the crocodile line of middle-men are basically nice people. I'm sure they are kind to their kids and Spot the dog. I'll bet they stay up all night worrying about this and that. I don't begrudge their families a good feed and a reasonably "relaxed and comfortable" lifestyle either.

.... but isn't it time that we all had a good long look in the mirror? We are talking about a transport system, not a penny-a-ride carnival. Look at this sideshow; replete with cardsharps, barkers and get rich quick merchants. The fact that the good professor dresses them up as investors, merchant bankers and "risk takers", makes not the slightest bit of difference. If the straw hat fits - wear it.

C'mon people - time to shake some dust!

Critics of PPPs might like to stand back and smell the dollars.

There is no reason in principle why governments should not purchase services from private sector firms, just as private sector firms purchase services from other private sector firms. The question of best supplier should simply revolve around which entity has the best skills, financial base and risk management capability for the job.

Problems arise in several ways.

There are "rocket scientist" financial engineering deals: a State rail system leasing locomotives (the lessor enjoys depreciation benefits unavailable to government). While these rarely go wrong, the result is simply that some cost is shifted to federal government.

There are "nobody told us" deals: government hires a private firm to run immigration detention centres, claims commercial confidentiality about the contract and claims to know nothing about abuses that occur inside.

There are "ideological obsession" deals: to keep large capital expenditure out of the government cash account. Result: continuing "surplus" (although anyone with an ounce of nous knows that the State is worse off on an accrual accounting basis).

Then there are frankly commercially naive deals bordering on lunacy: bureaucratic triumph of hope over experience. Consider the disastrous federal government initiative to outsource information technology under Minister John Faye. Recent examples include the Sydney airport rail link and cross-city tunnel.

Anyone who thought that a travelling couple would pay more for unreliable train travel from Sydney airport to the city than it costs for a taxi needs daily checking to ensure that they are taking their medication.

Then there are carpetbagger deals: airport privatisation for example.

Hey, guys, huge tract of land, exempt from State planning regulations. We can do what we like... let's force out the aircraft and become property developers.

State governments have traditionally been competent at buying paper clips and hiring school cleaners. But managing acquision of PPP services is a new ballpark. Governments were simply not equipped at first with the skills to do it competently. They may develop them over time.

We hope.