Canada has the dubious distinction of being a global leader when it comes to outsourcing and privatization of public services and infrastructure.
The rush to outsource comes with very little debate in our legislatures and rarely rises above the noise during general elections. Yet it represents a fundamental shift in how we access government services.
We’re in Ottawa this week for a national conference organized by the National Union and the Public Services Foundation of Canada on new forms of privatization. The message is clear – no public sector worker is safe from a tsunami that threatens to cut jobs, reduce wages, degrades public services, costs more, reduces accountable and ultimately attacks democracy.
Privatization and outsourcing take various forms, including public-private partnerships, social impact bonds, direct service contracting and even the transfer of funds to individual users who are forced to become their own employer.
Dexter Whitfield, a professor at Australia’s University of Adelaide, notes that private-public comparisons are often misleading, pitting new proposals against the status quo rather than a comparable public option. Not only are in-house proposals discouraged, but are actively blocked.
Whitfield says that despite the many failures and lack of evidence to support such broad outsourcing, the speed of privatization is accelerating, particularly during difficult times.
Desperate governments are the best customers of large multi-national corporations looking to profit from our public sector.
Whitfield points to particularly high transaction costs involved in these schemes, including social impact bonds which he says the “whole process is mad.”
Whitfield looked at public-private partnerships in the UK. Not only are profits of 12-13% built into these contracts, but found the average profits to be closer to 29 per cent.
At that rate of profit, Whitfield says these are really “scams on a big big scale.” Those profits come from public money that could be supporting other needed initiatives.
Yet despite the built-in profit, there is still an extraordinarily high failure rate in the UK – about one if five P3s simply fail.
Deb Daviau, President of the Professional Institute of the Public Service of Canada, warned of loss of institutional knowledge as long-term public sector professionals are replaced by private contractors.
She says contractors have created a “shadow public service” operating without the same restraints or rules that public sector workforce faces.
Larry Brown, National Secretary-Treasurer for NUPGE, said the approach to delivering services is different when the provider has a legal responsibility to make money.
Brown singled out two former Ontario finance ministers – Dwight Duncan and Janet Eker — who having cut public services while in office and are now lobbying for more privatization to allegedly fix the problems they created.
The two are calling for a centre of expertise funded by government that would help the private sector grab more public money.
These people have a “vested interest in privatizing public services,” says Brown.
Jordana Feist, a senior researcher with CUPE, says that private consultants have been using “cookie-cutter content” in preaching Neo-Liberalism and Neo-Conservatism to municipalities. Her research shows that many of these consultants are cutting and pasting the exact same text in doing core service reviews for various Canadian cities.
Yet the cost of these core service reviews doesn’t appear to take into account the size or complexity of the municipalities. She notes that Toronto and Prince George BC both paid KPMG $350,000 to conduct core service reviews. She says that Moncton paid $80,000 and “little” Vernon BC paid $40,000.
“The could offer it for even less because they had already written the report three times,” said Feist to the laughter of the audience.
In the U.S. and Britain activists are fighting back by calling for legislation to protect the public interest.
Jane Carter, a labour economist with the American Federation of State, County, and Municipal Employees (AFSME), shared polling data to show that Americans strongly opposed losing control of their public infrastructure, especially to Wall Street bankers and off-shore investors.
At least seven US States have passed legislation now that limits the length of contracts for public services, requires greater transparency, the ability to cancel contracts of poor performers, establishes minimum labour standards and prohibits companies that have broken laws or evaded taxes.
UK activist Cat Hobbs says a similar movement in underway in Britain. Hobbs is founder of We Own It, a new campaign that puts people before profit in the delivery of public services.
She said there is a significant gap between public opinion and the actions of British politicians.
She says that public services are mostly monopolies – there are very few companies capable of taking on much of the specialized work done by government.
Monopolies “tend to get worse by their very nature,” she says. “Instead of service run for the benefit of those who use it, it is run for-profit.”
She noted that the tide is reversing. In France, for example, Paris took back its water system from the private sector and reduced water bills by 8 per cent in the process.
Hobbs says that polling in the UK shows that 60 per cent believe the default ownership should be public and 80 per cent believe there should always been an in-house bid when public services are put out for tender. She says 88 per cent believe government should have the ability to recall a contract if the provider is doing a bad job.
A case study panel looked at a number of Canadian examples. Patti Markland, OPSEU’s Developmental Services Sector Chair, and Randy Robinson, OPSEU’s political economist, both participated.
Markland spoke about individual funding directed through Ontario’s Passport Program and the challenges it presented around attracting qualified individuals. Robinson highlighted the failures of ORNGE, in which the “A” was removed from the word orange. They took the A out because it stood for accountability, Robinson said, admitting he swiped the joke from the Ontario Tories. In setting up a series of shell companies, ORNGE paid for 22,000 hours in legal fees.
Joan Jessome, President of the Nova Scotia Government and General Employees Union, spoke about how the NDP government didn’t consider handing over financial planning IT to IBM as “privatization” given government IT employees were given the opportunity to move with the work. She said most didn’t, and of those who did, most returned to the public service within a year.
Alex Himelfarb, formerly the most senior public servant in Ottawa, gave the opening keynote address suggesting there was nothing more timely than a conference on privatization.
Himelfarb says tax cuts by previous Liberal and Conservative governments had cost Canada “resilience” during the recent recession.
The Liberals had cut $100 billion in annual revenues through tax cuts and the Conservatives added another $14 billion with a two-point cut to the GST. That’s on top of another $30 billion in corporate and other tax cuts passed on by the Harper government. Now the Harper government proposal on income splitting will cut another $3-$4 billion in revenue to benefit mostly wealthy families.
Himelfarb was critical of the opposition for not asking questions about the country we were dismantling.
While nobody likes taxes, Himelfarb says previous generations were more willing to pay understanding what they got in return.
He says we are running on the “fumes” of the legacy left by previous governments. The present environment is not paying it forward for the next generation who will be left with a legacy of environmental degradation and broad social inequality.
Government spending in Canada is expected to be the lowest it has been in 70 years relative to the size of the economy. “That’s before Medicare and mass education,” he said.
Himelfarb says the present state of affairs represents a “trickle-down meanness.”
“A meaner country is less interested in paying taxes,” he said.