House of Assembly Fifty-First Parliament, Second Session (51-2) 51 2 Parliament of South Australia House of Assembly published Question Time Public-Private Partnerships PUBLIC-PRIVATE PARTNERSHIPS Mr GRIFFITHS House of Assembly Goyder PUBLIC-PRIVATE PARTNERSHIPS Mr GRIFFITHS (Goyder) (15:00): My question is to the Treasurer. Members interjecting: The Speaker House of Assembly The SPEAKER: Order! Mr GRIFFITHS House of Assembly Mr GRIFFITHS: How will the government ensure that the public-private partnerships investments are made transparent to the South Australian taxpayer? The Auditor-General has identified that, in the 2006-07 budget, expenses for PPP projects have been limited to the cost of PPP consultants, and the government has not yet resolved whether the transactions associated with those PPPs will be off balance sheet, or how they will be represented in the financial reports. The Hon. K.O. FOLEY House of Assembly Port Adelaide Deputy Premier Minister for Industry and Trade Minister for Federal/State Relations The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:01): Ultimately, the Auditor-General will make a determination as to whether these projects are on balance sheet or off balance sheet. It will depend upon the nature of the PPPs, the quantum of risk that is transferred and the number of services that are transferred to the private sector as to whether or not these will be off balance sheet transactions. The advice I am provided with is that a view is developing with some speed in the United Kingdom and Europe (particularly in the United Kingdom) that public-private partnerships should be on balance sheet; that they should not be treated, in an accounting sense, as off balance sheet. That is the sort of stuff that accounting firms and auditors-general spend a lot of time on, working out how the world will be structured in terms of those transactions. So, I will leave it up to the accountants and auditors-general of the world as to how these projects will be treated in terms of their accounting standard. It does not much matter, at the end of the day because, even if these transactions are off balance sheet, as far as the rating agencies are concerned, they view the debt exposure to a public private financing initiative as being a state liability, as a state debt. For presentational purposes, you might say that we have $2 billion worth of state debt, and then try to say that the extra $2 billion you are carrying because of the PPPs is not state debt. That does not wash with the rating agencies: they would view that as a $4 billion state debt. In terms of the creditworthiness of the state, there is not a lot in it in respect of whether it is on balance sheet or off balance sheet. There are, of course, some benefits to its being off balance sheet, as it is treated as an operating expense. If it is on balance sheet, it is treated in a different manner. So, there are a lot of issues to be resolved. We have not as yet gone to the expression of interest stage or the tendering stage, but my expectation would be that almost certainly these projects will be treated as on balance sheet, particularly given that, with the prisons, we are not outsourcing the custodial services. As I said, I think that the other projects will more than likely be treated as on balance sheet, and it will be open to full scrutiny, as these projects are.