Opinion

Hey there, time traveller!
This article was published 02/03/2016 (2649 days ago), so information in it may no longer be current.

The results of the recent federal election are a likely indication of what Manitobans want to see from their next provincial government: transparency; stimulus spending on ailing infrastructure, financed by deficits; a transition to a green economy; and respect and support for Canada’s public service workers.

In an open letter to Canada’s public servants, Prime Minister Justin Trudeau made a campaign promise to reverse the decade-long attack on the public service, acknowledging the invaluable role it plays in our society. Hopefully, that spirit will filter through to the party that forms Manitoba’s next government.

Government spending, public-sector employees and unions seem to come under the gun in society, with an assumption a healthy public service sector and public spending are somehow a net drain on society. Nothing could be further from the truth.

There is now a considerable body of research showing the value of spending on public services. The Winnipeg Free Press acknowledged in a February editorial how wrong things can go when “governments go cheap.” Flint, Mich., First Nations communities, Walkerton, Ont., North Battleford, Montreal and now Winnipeg are all examples of how cutbacks on infrastructure and public services can have a serious impact on people’s lives.

Cutting spending and staff leads to problems that eventually bubble to the service: lead poisoning in Flint; E. coli poisoning in Walkerton; raw sewage in the Red River; crumbling highways, streets and bridges; health care professional and/or teacher shortages. Many of these tragedies have an outsourcing story at their heart, often in the form of public-private partnerships.

In an effort to have its cake and eat it, too, many governments look to P3s or social impact bonds (a way of funding social services using private-sector involvement) to provide services cheaper and more efficiently. The private sector, according to the populist economic theory of neoliberalism, can do anything better than government, and as costs come down, so can taxes. Cut taxes, transfer responsibility to the private sector, shrink government and voila — we have an efficient allocation of resources. Textbook perfect.

Real life, however, rarely follows populist theory. In a report published by the Canadian Centre for Policy Alternatives — Saskatchewan, 22 incidents of outsourcing of public services through P3s in Canada are evaluated. From snow-clearing nightmares in Halifax to a bankrupt private surgical clinic in Alberta to P3 mismanagement in B.C., examples abound of privatization — also known as outsourcing — gone awry.

Outsourcing can be complex and lack transparency, particularly when P3s are used. Under a P3, a for-profit company does any combination of designing, building, financing, operating and even owning public infrastructure. Contracts, which range from years to decades, are complex and need to be carefully analysed before they are awarded, but the efforts of strong lobby groups such as the Canadian Council for Public-Private Partnerships present P3s as a lower-cost, low-risk way to finance public infrastructure. Many governments accept that claim at face value.

Even social programs are susceptible to the privatization grab. Social impact bonds are being used to fund services typically supported by taxes, such as in prisons. The public sector issues a bond, and the private or social sector finances and delivers services under contract to the public sector. Specific delivery timelines and targets, such as a reduction in recidivism, are set. If targets are met, the agency can cash the bond and receive reimbursement for its costs and a rate of return based on performance.

Like P3s, social impact bonds are extremely complex, and the claims made about them are equally dubious. As one expert, Dexter Whitfield, stated: “The organizational structure of SIB projects is more innovative than the services they deliver and the methods they use to achieve outcomes.”

Whether with P3s or impact bonds, corporations have to put profit ahead of social outcomes; in the case of the bonds, that means only those individuals with the best chance of succeeding with be chosen to participate.

Even then, there are examples in the U.S. and U.K. of impact bonds not meeting targets, leaving governments to spend large sums of money to clean up the aftermath, and few examples of bonds that have delivered.

In 2013, the government of Manitoba released the regulations that govern the province’s new Public-Private Partnerships Transparency and Accountability Act. A first for Canada, this act recognizes the serious accountability concerns with P3s and forces officials to consider whether they have met certain criteria to protect the public interest. Although the regulations could have gone further, having such legislation on the books provides an important tool with which to address the many pitfalls of P3s. It’s a tool that needs to be used regardless of which party takes power next month.

We now have enough evidence to judge whether or not outsourcing of public services and downsizing of the public sector delivers a net benefit to society. In most cases, the public sector can, if properly resourced, deliver better results for less money. As a growing number of disasters such as Flint play out, insourcing is becoming more and more common in North America.

The results of the recent federal election indicate most Canadians understand the value of publicly provided services. Hopefully, this is a lesson all the political parties in Manitoba have absorbed.

Lynne Fernandez holds the Errol Black Chair in labour issues at CCPA-Manitoba. This commentary is part of the group’s UNSPUN provincial election series.