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When it comes to privatized water, it seems the National Post doesn’t want to deal with the facts, preferring to deal in slurs and selective information. Last month, the Post published a column by a well-known advocate of privatized water in its Financial Post section. We can’t share the outrage of that piece with you, as the Post’s archives are only free for 30 days. But we can share CUPE’s response, which dismantles Foster’s arguments that the British experience with privatized water has been a success.

Private water creates public problems

By Paul Moist

A recent piece in the Financial Post argues selling off Canadian water systems is the cure for our aging plants and pipes. But Peter Foster’s article shilling for the water multinationals misrepresents many points – and misses some altogether.

Foster accuses CUPE of running “a campaign of lies”, but we are left scratching our heads at the campaign he is running. To represent the British privatization of water as an unqualified success is simply not on. As one example, corporations have failed to sink long-promised cash into aging pipes, leading to the loss of 3.6 billion litres of water a day, according to recent figures from the water industry regulator.

Price hike after price hike has allegedly been earmarked for refurbishing and upgrading the system (the latest price hike is an average of 12 per cent above the rate of inflation, and is again supposed to go to plugging the leaks). The corporations routinely overstate their capital spending to get the regulator’s approval to hike prices. When the actual spending is lower, the difference becomes profit. All the while, the shortages and leaks continue. Just last week, the head of Britain’s Consumer Council for Water accused the water corporations of not providing value for money, suggesting water users were “paying more and getting less”.

In a bizarre illustration of the market logic that infects public services when they are privatized, Thames Water has set a benchmark beyond which they will not reduce leakage, because it would be too costly and presumably eat into their profits. This “economic rate of leakage” would cut leaks from the current 900 million litres of water that are lost in the city of London each day to 720 million litres. So much for market incentives bringing new efficiencies to public services.

It is also important to remember the initial fallout of Margaret Thatcher’s massive selloff: water bills went up significantly and so did disconnections. Far from creating competition, privatization created regional monopolies, handing corporations 25-year contracts without having to compete for the business. A change in law has added a further 25-year notice period to ending or tendering one of the monopolies. Finally, heavy public subsidies – including lowballing the sale of the country’s water assets, writing off water corporation debts and funding a ‘green dowry’ to meet environmental requirements – helped pad the industry’s fat profits.

While regulation may have put a lid on the worst of the industry’s behaviour, we have yet to see the British regulator move affordable prices and environmental stewardship ahead of further profits on the corporate priority list. The British regulatory regime also leaves little room for public participation or disclosure of information.

On the water front at home, it is clear that public private partnerships – another form of privatization – are no solution to our water needs. The cancellation of a problematic public private partnership for Hamilton’s water has resulted in improved performance and cost-effectiveness. The system is $1.2 million under budget, according to the city’s public works department. In addition there is no need to make costly incentive payments to private operators when performance improves, saving a further $195,000.

The Moncton water plant, a P3 awarded to US Filter without any tendering process, has cost millions more than a publicly-financed plant. While the city desperately needed a new water treatment plant, water users are paying the price of private financing. We calculate that Moncton residents pay 44 per cent more for private drinking water than Fredericton citizens pay for public water.

It’s becoming more difficult to sidestep the evidence that private water costs more. Several years ago, a plan for private management and operation of Moncton’s water and sewer lines was shelved after an independent study showed it would cost the city less to upgrade the system itself, with public financing and operation.

As for Walkerton, there is no question that the privatization of laboratory testing was one of many factors contributing to the tainted water tragedy, along with deep cuts to inspectors and a lack of proper training. Now the town’s water system has been turned over to private operators, exposing Walkerton residents to the financial and accountability risks of P3s.

As communities find themselves with their backs against the wall trying to pay for infrastructure upgrades publicly, it’s disturbing that the Canada Pension Plan is sinking billions of dollars in workers’ deferred wages into a British water corporation – instead of into Canadian infrastructure. Foster neglects to mention that the CPP used to provide a healthy pool of investment capital for Canada’s public infrastructure, including our underfunded water systems. 

Until 1998, all CPP surplus funds were invested in provincial government bonds. Provinces could borrow at federal government rates – cheaper than borrowing through the direct market. Much of our country’s public infrastructure was built with the help of capital invested by the CPP. Today, the multi-billion dollar CPP reserve fund has become a jackpot for public private partnerships and other privatization schemes.

Clearly, Canada is in the midst of an infrastructure crisis. But P3s and privatization are no answer to the challenge governments and communities face. Publicly financed, owned and operated water services are cheaper and more efficient, as well as being more accountable and responsive. It’s time to stop promoting the dubious results of British privatization and instead focus on home-grown solutions that meet the needs and expectations of Canadians.

Paul Moist is President of the Canadian Union of Public Employees, Canada’s largest union with 550,000 members in communities across the country.

Submitted Oct. 4, 2006