Public Values

Privatization advances quietly in 2008 Conservative federal budget

P3s, shrinking surplus and no-strings contracting hem in public role and new programs.

Jim Flaherty and Stephen Harper on Budget Day, February Ish Theilheimer

OTTAWA, March 6, 2008: Last week's federal budget advances the Conservatives' long-term goals of shrinking government and privatizing public assets, but it did these things so quietly that most Canadians were not aware of them.

For example, the budget speech quietly announced that a new crown corporation, PPP Canada Inc., will be set up to promote, identify opportunities, and oversee assessments of public infrastructure projects in which private business is involved (public-private partnerships or P3s). Last year's budget allocated $1.25 billion exclusively for projects for which P3 arrangements were considered as a first option. Most of that money remains unspent.

The new agency received barely a sentence in the budget speech. The parameters under which it operates (top paragraph, page 133), are sketchy. Some corporate information is available on its website.

"The other parameters have not been made public," Sébastien Badour, a senior economist with Finance Canada, told by email.

Badour wrote that the company "will play a key role in the implementation of the P3 Fund. Its exact role will be finalized as the office transitions to full operational status (currently, the office is in its set up stage)." It will be "a wholly-owned subsidiary of the Canada Development Investment Corporation (CDIC), the mandate of which is "to manage Crown corporations and investments and privatize its holdings when appropriate."

The government, through measures like these, is ensuring that business gets a stake in new public infrastructure projects such as hospitals, roads and transit, despite a lack of documentation that P3s save money. "They have proven over and over to be a bad deal for Canadians and a terribly ineffective way to build infrastructure, especially schools and hospitals," said Larry Brown, secretary-treasurer of the National Union of Public and General Employees. "The track record of P3s is one of failure at everything except enriching the private companies involved."

No information is available as to how the new corporation would be accountable to the public, the kind of assessments it would do of projects, or the kind of transparency and disclosure rules under which it would operate.

A recent report by the Canadian Centre for Policy Alternatives concluded there is "a lack of objective evidence that [P3s] are a superior option." Researcher Stuart Murray found a growing body of evidence that P3s are "less cost-effective, timely and transparent than traditional government procurement processes."

In PEI, for example, the Confederation Bridge is cited as a successful P3, but it cost $45 million more than it might have because it was financed privately. Private financing of Winnipeg's Charleswood Bridge added an extra $1.4 million in present value costs to the project's $11.6 million cost. In Britain, privately-financed hospitals will cost Britons an extra £45 billion over the next three decades, with private contractors making a 540 percent return on investment for hospital construction worth £8 billion, according to CUPE research.

P3s, however, may not be the most important way in which the Conservatives have advanced the privatization agenda in government and through this budget.

One of the Conservatives' most important accomplishments in office has been the shrinking of the ability of any government - theirs or others that follow - to launch new programs and play a positive role. As leading strategist and long- time Stephen Harper mentor, Tom Flanagan, told Canadian Press (CP), the Conservatives are gradually "'tightening the screws on the federal government, and making it harder for Ottawa to spend."

"They're boxing in the ability of the federal government to come up with new program ideas The federal government is now more constrained, the provinces have more revenue, and conservatives should be happy," Flanagan told CP.

The Conservatives are constraining federal spending power in general, he said, and preventing the opposition "from being able to campaign on expensive promises" like childcare or public transit. Budget surpluses have declined from $13 billion last year to projected surpluses averaging $3 billion per year over the next four years, leaving little operating room for opposition parties advocating new social programs.

Contracting exempt under "accountability" legislation
Another way Harper has diminished the role of government is through accountability legislation which, ironically, has reduced transparency and disclosure because it made government contracts exempt from it.

Government funding of non-profit organizations is being delayed and subject to much greater review, with the result that across Canada, a number are laying off staff, according to CUPE economist Toby Sanger. Contracts with private companies are not subject to the same scrutiny.

"It has become much more difficult for organizations to get grants in any way, but there's a massive accountability loophole for contracts," Sanger says. Things have reached the point, he says, where non-profit organizations are forming for-profit offshoots in order to obtain government contracts and stay alive.

The Conservative government's push toward privatization has occurred without fanfare and in a deliberately muted way. "Harper really didn't have the option of the cataclysmic approach because you can't do that without a majority," Tom Flanagan told CP. "So he's made the incremental approach work - all the time having the insecurity of a minority government. It's really quite a performance, I think."

Ish Theilheimer is Managing Editor of and Publisher of

Posted: March 06, 2008

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