Bankruptcy Highlights Risks in Privatization Schemes
Jan 22, 2018
The recent bankruptcy of the giant UK firm Carillion has important lessons for Manitoba. Carillion has cashed in on massive privatization schemes around the globe – from the UK to Saskatchewan – providing various public services, like snow clearing, building maintenance and infrastructure project management.
According to CBC, “Carillion Canada is the country's largest road service contractor, responsible for plowing and maintenance along 40,000 kilometres of highways in Ontario and Alberta.” For an employer of 6,000 Canadians, the fall of Carillion will not only impact those who work for the corporation, but also the vital services they were contracted to provide.
In Manitoba, the government has been pushing for more of these costly schemes under the banner of Public Private Partnerships, Social Impact Bonds and Alternate Service Delivery. Make no mistake; these are all buzzwords to describe the same thing: the privatization of public services.
According to the Star Phoenix in Saskatchewan, “The company’s financial woes bring into question the construction of several major construction projects in Canada, including road building in Alberta and Ontario and the construction of hospitals and mental health facilities in Ontario, Saskatchewan, the Northwest Territories and Nunavut. It also has several major long-term maintenance contracts for highways and medical facilities across Canada.”
The problems with these privatization schemes aren’t new. The MGEU has been calling out the negative impacts of P3’s, contracting out, and outsourcing services for years.
One of the many problems they present is a lack of transparency and accountability. What happens when a company like Carillion goes bankrupt? Who is left with the bill and what does this mean for the services they provide?
Rather than protect the interests of Manitobans and reveal the contract details, the Pallister Government has repealed the P3 Accountability Act, which asked the government to “show their math” to prove that Manitobans were getting value for their investment.
Contrary to what its proponents claim, privatization often ends up costing tax payers more than keeping the services public.
In 2014, Ontario’s Auditor General confirmed this fact when she reported that of the 74 P3 projects reviewed, they cost the province $8 billion more than if they had been procured publicly.
So privatization is less transparent and costs more, but what about the quality of service? After all, if the service doesn’t meet the public’s needs, little else matters.
Ontario’s experience with private snow clearing on highways has not been good. Carillion was fined $900,000 by the Ontario Government for not clearing the Queen Elizabeth Way after a 2014 winter storm. Following numerous issues with the quality of snow clearing, the Auditor General found that it was taking twice as long for private contractors to clear snow on Ontario highways and they were using less anti-icing liquid and salt than they were supposed to. Once again, the companies’ motivation to maximize profits left them cutting corners, which ultimately degraded the service and the safety of the highway.
Despite all of this, there are no signs that the mountain of evidence against privatization is slowing Premier Pallister and his government down. With plans to build P3 schools and KPMG reports trying to justify more privatized public housing, social services, health care and infrastructure, it is only a matter of time before a deal goes really bad in Manitoba.
At the end of the day, privatization isn’t worth the risk. The public always ends up paying in the end – through increased taxes, failed services, or both.