Published in the National Business Review of 02 November 2007

Labour's attitude to public private partnerships has been exposed as hypocritical amid revelations that the government has expanded considerably a nine year old scheme in housing.

National is trying to use this and recent statements from cabinet ministers to attack the government's reluctance to consider such partnerships to build infrastructure.

In the housing scheme, private investors owning suitable rental properties lease them to Housing New Zealand, which then rents the houses to its clients. This extends the supply of affordable rental housing while giving landlords a secure income stream.

National MP Murray McCully started the scheme when he was the Minister of Housing in the mid 1990s. The number of properties in the scheme has more than trebled rising from 846 in June 1998 to 2,883 properties currently.

This is four per cent of Housing New Zealand Corporation's rental stock, and the Corporation intends to continue to use home leases as a tool for providing state housing, a spokesman said.

In the 2002/03 period, the Labour led government showed some interest in public private partnerships (PPPs), but a Treasury study published in 2006 is sceptical about the benefits.

It concluded that the usual benefits claimed for PPPs: getting a project built earlier than would otherwise be the case and getting better value for money could be obtained through a variety of other techniques.

The Housing New Zealand scheme touted by Mr McCully mixes state and private equity, which make it more politically contentious than schemes that involve the private sector funding public infrastructure projects such as roading.

Dr Cullen told the NBR this week that the "Government can always borrow more cheaply than the private sector can, and if the government does allow the private sector to finance infrastructure such as roads, the people who will have to pay a premium are the public users."

An argument blew up in Parliament recently over what is meant by a public-private partnership.

After John Key raised the prospect of having some schools built or managed privately, Labour immediately heaped scorn on the idea, with Education Minister Steve Maharey being particularly critical.

National retaliated by asking questions in Parliament about PPPs in roading which led to Transport Minister Annette King defining PPPs as government funding of roading contracts.

"We already have public-private partnerships. We have the private sector building the roads; we have the public sector paying for them."

It was a different story in 2002/03. In November 2002 the then Transport Minister Paul Swain described PPPs as "potentially a useful alternative procurement method for larger projects."

In November 2002, Dr Cullen in a speech to the National Press Club carefully defined PPPs as being in the middle of a continuum between traditional contracting and the private sector doing a BOOT (build, own, operate, toll).

A BOOT arrangement generally involves private equity and on going private ownership. The Land Transport Management Act passed in 2003 allows for PPPs and tolling, but requires that any assets built under a PPP remain in public ownership.

The Labour led government has repeatedly stated its opposition to private equity involvement in funding public infrastructure calling it privatisation by stealth. Its allies, the Greens, also "have strong reservations and concerns" party co-leader Russel Norman said this week.

There have been no PPPs used in transport (or in other infrastructure projects) under this government.