If you thought there were problems in how the federal government administered the sponsorship program, prepare yourself for the next attack on the public purse.
Michael Wilson, in a commentary in Monday’s Globe and Mail, sings the praises of public-private partnerships as a way to inject needed capital into our decaying public infrastructure. As chair of the Canadian Council for Public-Private Partnerships, Wilson has been offering that advice to ministers at the federal and provincial level.
What he doesn’t offer is this advice to taxpayers: Hold on to your wallets. If the Liberals and their corporate cronies could cream off $100 million from a $250 million sponsorship budget, imagine the riches to be made from the billions to be invested in vital public infrastructure over the next few years.
A critical analysis of P3s in Canada and around the world shows their benefits are largely theoretical while the costs are all too real. For all the spin about efficiencies, innovation and transferring risk, the cold hard reality is that P3s inflate costs, reduce service and confound accountability. Whether we look at the sorry history of P3 schools in Nova Scotia, the current tussle around tolls for the 407 or the looming nightmare of P3 hospitals, we see the same pattern.
Capital costs rise because of sharply higher private borrowing costs and because the private sector makes more money from frills. Even the most basic facility is conflated into an architectural wonder as the priorities of those who know how to deliver a service give way to those who know how to generate a profit.
The latest example of this is the Abbotsford P3 hospital. There an independent forensic accountant has found that the estimated costs of the project have jumped 94 per cent, lease payments have almost doubled and $393 million in debt-servicing money can’t be accounted for. Meanwhile, a former director with the Auditor General finds the risk transfer is dubious and accountability is weak – this for a project for which there is now only one bidder. So much for the benefits of competition.
In negotiating P3 schemes, lawyers and accountants pocket princely sums drafting contracts of thousands of pages that are not open to scrutiny by the public, legislators or the press. If the Auditor General was stymied in her efforts to access information from Crown corporations, imagine what will be required to pry secrets from the multinationals that benefit from these schemes.
For make no mistake about it. The big money to be made from P3s is not destined to strengthen small business or local economies. It’s huge global corporations – Vivendi, Sodexho, Suez, Carillion – that stand to pocket the enormous gains, confident they can walk away from the deal when it suits them. In Hamilton, five different companies (including Enron) have owned the water services contract over the past ten years, making accountability for costs and environmental spills impossible.
Meanwhile decent jobs that pay a living wage are replaced by low-wage, casual labour as funding intended for front line services is diverted to overhead and profits. In the case of the P3 hospitals in the UK, the British Medical Journal reports that the number of beds have been cut by 26 per cent and the number of staff by a third. For Canadians concerned about access and waiting times, P3 hospitals are disastrous.
Experience around the world has also shown that with P3s, buck-passing is endemic and corruption is increasing. What’s worse, international trade and investment agreements can lock in bad P3s.
The good news for Canadians is that there’s a cost-effective alternative to P3s that protects the public interest and provides a good return for investors – public bonds. Despite debt hysteria, the ratio of debt to GDP is low and falling at the federal and provincial levels. Debt as a portion of local government revenues has dropped since 1998.
Thus there is no reason to turn to private investors to fund public infrastructure directly when their borrowing costs are consistently higher. And, in a post-Enron world, no one is going to be fooled that long-term lease obligations are anything other than debt. With interest rates low and the need high, now is the time for bonds.
We enjoy a high quality of life in Canada because of our public services. We owe it to the next generation to renew and strengthen them, not serve them up as investment opportunities for speculative capital.
Canadians are anxious for the federal government to show leadership in renewing and strengthening public services – our hospitals, communities and highways. They want value for money for their tax dollars and to be able to hold their elected representative to account for the quality of these services. On both scores, P3s are not the answer.
Paul Moist is National President of the Canadian Union of Public Employees, Canada’s largest union representing a half million public service workers.