Public-Private Partnerships in the Context of the European System of Accounts (ESA95)
Affiliation(s)
Department of Accounting, Faculty of Economics and Business, University of Murcia (Regional Campus of International Excellence “Campus Mare Nostrum”), 30100-Campus of Espinardo (Murcia), SPAIN. Department of Accounting, Faculty of Economics and Business, University of Murcia (Regional Campus of International Excellence “Campus Mare Nostrum”), 30100- Campus of Espinardo (Murcia), SPAIN.
Department of Accounting, Faculty of Economics and Business, University of Murcia (Regional Campus of International Excellence “Campus Mare Nostrum”), 30100-Campus of Espinardo (Murcia), SPAIN. Department of Accounting, Faculty of Economics and Business, University of Murcia (Regional Campus of International Excellence “Campus Mare Nostrum”), 30100- Campus of Espinardo (Murcia), SPAIN.
ABSTRACT
This paper makes an analysis of the European System of Accounts (ESA95) financial treatment of Public-Private Partnerships (PPP). PPP are complex operations that allow incumbents to create infrastructures while hiding debt, with an eye on the next elections. However, the sad part of the story is that PPP are more expensive than traditional contracts in the long run. We think that PPP are not always the best solution. Governments should allocate the risk to the party that is the “least cost avoider”, i.e., the party best suited to control and/or bear the risk. Without this approach, the public sector runs the risk of using PPP with the aim to achieve inadequate goals, for example to achieve a short-term improvement of public accounts, and at the same time, worsening the long-term financial picture.
This paper makes an analysis of the European System of Accounts (ESA95) financial treatment of Public-Private Partnerships (PPP). PPP are complex operations that allow incumbents to create infrastructures while hiding debt, with an eye on the next elections. However, the sad part of the story is that PPP are more expensive than traditional contracts in the long run. We think that PPP are not always the best solution. Governments should allocate the risk to the party that is the “least cost avoider”, i.e., the party best suited to control and/or bear the risk. Without this approach, the public sector runs the risk of using PPP with the aim to achieve inadequate goals, for example to achieve a short-term improvement of public accounts, and at the same time, worsening the long-term financial picture.
Cite this paper
B. Benito, F. Bastida and M. Guillamón, "Public-Private Partnerships in the Context of the European System of Accounts (ESA95)," Open Journal of Accounting, Vol. 1 No. 1, 2012, pp. 1-10. doi: 10.4236/ojacct.2012.11001.
B. Benito, F. Bastida and M. Guillamón, "Public-Private Partnerships in the Context of the European System of Accounts (ESA95)," Open Journal of Accounting, Vol. 1 No. 1, 2012, pp. 1-10. doi: 10.4236/ojacct.2012.11001.
References
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[1] G. M. Milesi-Ferretti, “Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting,” Journal of Public Economics, Vol. 88, No. 1-2, 2004, pp. 377-394. doi:10.1016/S0047-2727(02)00076-2 [2] V. Koen and P. van den Noord, “Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting,” OECD Economics Department Working Papers, No. 417, OECD Publishing, 2005. [3] G. M. Milesi-Ferretti and K. Moriyama, “Fiscal Adjust- ment in EU Countries: A Balance Sheet Approach,” Journal of Banking and Finance, Vol. 30, No. 12, 2006, pp. 3281-3298. doi:10.1016/j.jbankfin.2006.05.010 [4] C. Hurst and E. Reeves, “An Economic Analysis of Ireland’s First Public Private Partnership,” The International Journal of Public Sector Management, Vol. 17, No. 5, 2004, pp. 379-388. [5] J. M. Buchanan, “Public Finance in Democratic Process, Fiscal Institutions and Individual Choice,” The University of North Carolina Press, Chapel Hill, 1967. [6] O. Hart, “Firms, Contracts and Financial Structure,” Clarendon Press, Oxford, 1996. [7] C. Brown, “Financing transport infrastructure: for whom the road tolls,” The Australian Economic Review, Vol. 38, No. 4, 2005, pp. 431-438. doi:10.1111/j.1467-8462.2005.00386.x [8] O. Hart, “Incomplete Contracts and Public Ownership: Remarks, and an Application to Public Private Partnerships,” The Economic Journal, Vol. 113, No. 486, 2003, pp. C69-C76. [9] European Parliament, “Public-Private Partnerships. Models and Trends in the European Union,” DG Internal Policies of the Union (IP/A/IMCO/SC/2005-161), 2006. [10] PricewaterhouseCoopers, “Delivering the PPP Promise: A Review of PPP Issues and Activity,” Pricewaterhouse- Coopers, London, 2005. [11] M. Bult-Spiering and G. Dewulf, “Strategic Issues in Public Private Partnerships. An International Perspective,” Blackwell Publishing, Oxford, 2006. [12] European Commission, “Green Paper on Public-Private Partnerships and Community Law on Public Contracts and Concessions,” COM(2004) 327 final. [13] European Investment Bank, “Evaluation of PPP Projects Financed by the EIB,” Synthesis Report, 2005. [14] R. Jones, “Public versus Private: the Empty Definitions of National Accounting,” Financial Accountability & Management, Vol. 16, No. 2, 2005, pp. 167-178. doi:10.1111/1468-0408.00103