It didn't take long for the jeremiahs to be vindicated. Many queued up to condemn the public-private partnership for Air Traffic Control in the UK.

A large number of Labour MPs thought it was a PPP too far. NATS is a monopoly which regulates the competing private airlines. They had trusted the leadership when it told them before the 1997 election “Our air is not for sale”. They might be able to live with a privatised telephone system or even at a pinch with some private sector hospitals and clinics, but not with this.For some Conservatives the PPP is a messy compromise. It would have been better to create an independent company, free of government and airline influence, with a strong balance sheet and good management capable of seeing through the investment in new technology that is central to NATS' future. By all means let the government regulate the fees charged, as it would remain a monopoly, but let it do so in a way which understands the reasonable costs of running the system.

Both sides predicted problems. As it turned out they came not singly, and they came quickly. It proved difficult and expensive to bed down the new Swanwick Air Traffic Control centre. The sharp decline in air travel, especially on the trans-atlantic routes after the terrorist atrocity of September 11th 2001, left a big hole in the revenues. NATS needed more money. Facilities had to be put in place. The banks demanded a government contribution.

There are lessons to be learnt. The government cannot easily allow something like Air Traffic control to get into financial difficulties, particularly when it retains a 49% shareholding. If the government really wants to be free of the costs of such services, it has to sell out completely, and make sure there are ways of continuing the service in the private sector even if the original company hits hard times.

It was not very sensible to sell a significant shareholding in NATS to the companies it is serving and regulating. The revenues of NATS fall when the cash flow of its major shareholders falls. The airline shareholders would not want to put up money for a rights issue at this point.

The public and private sectors work together best when there are clear demarcations of their respective roles. The private sector is good at supplying goods and services to the public under contract. It is much more troublesome if the two sectors are jointly responsible for a service, as they work and think in different ways. Naturally in any PPP negotiation the private sector partners will be trying to limit their risks whilst enjoying a strong revenue from the public sector. We see those influences in the London Underground proposals. Meanwhile, the public sector is more concerned with the political perception of the deal, and may well keep more risks than it should because it does not want to give up control. Why then is it paying the private sector?

If the government wants to get the best out of the private sector, it needs to create a competitive market of suppliers and then act as a fair client. It can work well. For a time the government, local and national, decided to use the private sector to provide nursing and residential care home places for people who would receive state support to be there. Many providers emerged.

More recently, the combination of new regulations requiring expensive changes and unrealistic limits on payments has caused a big reduction in beds. It is not easy recruiting and retaining care workers in the more prosperous parts of the country at the wages that current fees and charges permit. If the state wants to use the private sector it has to be realistic about fees, assuming there is sufficient competition in the marketplace to establish a sensible level of prices.

The government is aiming to bring in large sums of money from the private sector for investment in transport and in health. It should learn from the NATS experience that public-private partnership works best when there is greater clarity about the respective roles, and from the collapse of care home places that the government must pay more if it decides to regulate for higher standards. Each care home place is still a lot cheaper than keeping elderly people in NHS hospital beds long after their treatment, which is happening all too often. It will also discover that bankrupting Railtrack will make the private sector even more cautious about going into business with the state. The breakfast business may be a good one for the chicken, but it's not so good for the pig supplying the bacon.