Empirical implications and further PPP research

have to count this project against the General Government Deficit. While this issue was avoided for the second project, because the Irish government petitioned the European Investment Bank for loans for the construction of this scheme, the findings from the two school projects illustrate that policies and regulatory framework conditions have largely served the purpose of supporting PPP projects procured off balance sheet.

Turning finally to the question about the EU’s role in regulating PPPs in the member states (research question 4), the dissertation has shown that the EU has as yet mostly engaged in regulation of PPPs at a rather abstract and conceptual level, thereby giving national and sub-national administrations considerable room for manoeuvre in drafting policy and regulations to facilitate or hinder the formation of PPP projects. Further, the analysis displayed an inherent dilemma in the EU’s institutions between two conflicting concerns: on the one hand the establishment of an EU-wide PPP procurement market to attract private capital investments and thus develop the physical infrastructure in the member states, which is seen as fundamental to the effective functioning of the Single Market; and on the other, the Commission and Eurostat has been concerned that some member states would utilise the PPP model to sidestep the EU’s budget procedures for responsible fiscal policies by removing major infrastructure investments from the public sector’s balance sheets. The latter seems to be a sober concern, as the analysis revealed that removing major infrastructure investments from the public sector’s balance sheet has indeed been a primary rationale for embarking on large-scale PPPs in Ireland but also in the UK and elsewhere (Spackman, 2002; Flinders, 2005). Recently, the European Commission has launched a number of

‘soft governance’ initiatives, including the European Partnership Excellence Centre (EPEC), to support policy learning and the spread of best practice among the member states. The findings within this policy area are thus in line with the broader trend towards soft modes of governance in the EU, although it still remains to be seen whether EPEC and other soft governance initiatives will in fact lead to a greater degree of policy coordination across local, national and EU levels in the regulation of PPPs.

It is common in scholarly literature which discusses the rationales of governments for resorting to PPPs to assume that governments pursue innovation, collaborative advantage, mutual added value, etc. Further, it is often assumed within the governance branch of the PPP literature that PPPs comprise a new governance scheme, which is based on trust, collaboration and joint decision-making as opposed to ‘classic’ contracting out and privatisation, which was endemic in the NPM epoch (cf. Linder, 1999; Hammerschmid & Angerer, 2005; Osborne, 2010). Thus, in academic literature and indeed also in the large practice oriented literature on the subject, the reasons for governments to form PPPs are often connected with a number of positively charged objectives and a new way of thinking about governance in the public-private interface. However, the findings brought to the fore in this dissertation suggest that in reality the introduction of PPP is to a large extent determined by the state of public finances. PPPs are more likely to be favoured in situations of constrained public finances, where it can be used as a way to remove major public infrastructure investments from governments’ balance sheets, and thereby reduce the pressure on public capital budgets and provide more infrastructure than would otherwise be possible. This is illustrated by the Irish case, while in Denmark the public finances prior to the financial crisis were fairly strong. The Ministry of Finance was therefore less concerned about a short term need to finance projects, and more concerned about the long term implications and potential lack of control over municipal infrastructure investments.

These findings have significant implications because they suggest a gap between the assumptions commonly made in political debate and in the scholarly literature about governments’ objectives with PPPs, and the actual findings from case studies of concrete decisions about PPPs. While keeping in mind that the two country cases and four case studies from the schools sector obviously have limitations in terms of generalisability to other countries and PPP sectors (Yin, 2003: 10), they are also interesting from a more general PPP perspective because they illustrate that there is an inherent trade-off between short- and long-term interests and strategies in the PPP model. In the short term, if projects are indeed registered off balance sheet, it is correct that PPP can reduce public budget pressures and provide more infrastructure than would otherwise be achievable. From a rational actor perspective, this would make the PPP model very attractive for policy-makers and administrators (Niskanen, 1975). In the long-term, however, PPPs can be seen as challenging governance schemes because there is always a bill for governments - and thus indirectly taxpayers – to pay ten, twenty or even thirty years into the future. The findings of this dissertation thus suggest

that national PPP developments are likely to be determined by the state of public finances, and whether leading government actors take a long or short term perspective.

These findings are important because the argument that placing investments off balance sheet can reduce the pressure on public budgets thus can be said to be right in the short term, but indeed false in the long term: what has in reality been provided is the substitution of expenses here and now with a long-term loan with duration of 25-35 years. The dissertation thus contributes with robust empirical results across two country cases and multiple levels of analysis that support the observation made by Hodge and Greve (2007: 549), “We are certainly now drowning in promises by governments around the world that PPPs will provide public sector services more cheaply and quickly, with reduced pressure on government budgets. (...) A mechanism through which governments may turn a large, once-off capital expenditure into a series of smaller, annualized expenditures has simply been provided.” From the perspective of future generations of voters and tax payers, this raises fundamental accountability and legitimacy issues, which the scholarly research on PPPs has so far only started to address (see Mörth, 2007). Clearly, more research which focuses both on the short- and long-term interests, strategies and consequences of PPPs is warranted to uncover these broader legitimacy and accountability issues further.

The dissertation also makes a contribution to the field of PPP governance research, which has hitherto been characterised by case studies or single country studies, whereas comparative approaches are seldom taken (although see Greve & Hodge, 2007; Klijn, Edelenbos & Hughes, 2007; Ysa, 2007). As a result of this, very little is known about how, why and to what consequences national governments have adopted differing policy and regulation frameworks. Although studying two country cases obviously cannot provide the basis for generalisation of the statistical kind (Yin, 2003: 10), this study offers empirically rich descriptions of two PPP cases which can be utilised for the development of preliminary analytical categories of national PPP governance approaches, which can be tested and developed in further research. Thus, based on the findings, I will suggest the following taxonomy (see Table 10).

Table 10. Preliminary taxonomy of national PPP approaches Anglo-Saxon PPP

approach

Continental European PPP approach

Scandinavian PPP approach Country examples UK, Australia, Canada,

Ireland

Netherlands, Germany, France

Denmark, Norway, Sweden, Finland

PPP objectives of governments

Remedy budget constraints, some degree of

marketisation ideology and NPM- reforms (for example emphasis on value-for-money)

Remedy budget constraints and launch of new public governance based on horizontal cooperation

Unclear objectives, a mix of NPM principles (value-for-money) and new public governance elements (innovation, mutual added value)

Governance approach Widespread policy and regulation measures

Intermediate to high policy and regulation measures but fewer money earmarked for projects

Limited or unsupportive policy and regulation measures

Projects and sectors Large deal flow, high diversity in PPP sectors

Medium deal flow, primarily

‘hard’ infrastructure (roads, railways, etc.)

Low deal flow, few sectors covered

Although preliminary, this categorisation contains three national PPP governance approaches: (i) an Anglo-Saxon PPP approach, which is characterised by a comprehensive policy and regulation framework and an extensive deal flow across many procurement sectors. The UK is the predominant example, but countries such as Australia, Canada and, more recently, Ireland would belong to this group; (ii) a continental European PPP approach, which is characterised by intermediate to high policy and regulation measures but with considerably less money earmarked for PPP projects and consequently a medium deal flow, with a focus on ‘hard’ infrastructure (Grimsey & Lewis, 2004). Examples are the Netherlands, Germany, and France; (iii) a Scandinavian PPP approach, which is characterised by unclear objectives, limited and/or unsupportive policy and regulation measures, and a low flow of PPP deals in the market. Indeed, this is a rather rudimentary categorisation, which nonetheless makes a first important step towards developing a taxonomy of national PPP governance approaches, which further PPP research could build on and develop through additional comparative case studies.