“The principle is the same whether one buys a TV, or building a hospital on credit – the total cost will be greater and the cost accrues interest,” said Hansen referring to the proposal. Socialist Left Party representative Hansen has the support of the Parliament Health Committee. They also believe there is no possibility of private financing of hospital construction and rejected the proposal from the Progress Party in order to safeguard the existing public-private healthcare collaboration.
Failed in UK
Supporters of the proposal suggest the system will pave the way for “greater choice of funding for health authorities and also give them greater access to capital”. However, Hansen reminded the Conservative government that the UK is now trying to abolish the application. The country has built over 100 hospitals with the PPP funding costing 12 percent more.
PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and is responsible for the substantial financial, technical and operational risk in the project. In some types of PPP, service costs are financed exclusively by the users of the service and not by the taxpayer. In other types (notably the private finance initiative), capital investment is made by the private sector to provide agreed services and the cost of providing the service is financed wholly or in part by the government.
A common problem with PPP projects is that private investors can sometimes obtain a rate of return that is higher than the government’s bond rate, even though most or all of the income risk associated with the project concerns only the public sector.