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Privatization of public infrastructure is not the answer: P3s cost more, deliver less

November 2, 2006 Ontario Health Coalition: News Release McGuinty Government Fudging Costs of Royal Ottawa Hospital P3: Hospital dramatically more expensive due to privatization

October 31, 2006 Ontario Health Coalition news release and backgrounder on P3 hospital secrecy

For public sector workers, a new state-of-the-art facility can be an attractive prospect. Many communities have been waiting a long time for replacement of tired old buildings or highways full of potholes – especially after eight years of Tory rule that ignored Ontario’s infrastructure needs.

OPSEU members march on Queen's Park June 3rd to protest P3 financing of public infrastructure

Infrastructure minister David Caplan is correct when he says that Ontario’s infrastructure deficit could be as much as $100 billion. However, his prescription for addressing that deficit could put billions in the hands of private corporations and create a legacy of unnecessary debt for the next generation.

Last fall Caplan announced 28 hospital projects using what he calls “alternate financing and procurement,” or “AFPs.” Most of us know this arrangement by another name: a “public-private partnership, or a “P3.”

P3s not just for hospitals

P3s have been creeping into Ontario for some time, often below the public radar. And they aren’t just for hospitals and highways, like the 407. Recently announced P3s include new court houses in Waterloo and Oshawa, a $700 million light rail project in Ottawa, a new arts center for Orleans. These projects are being initiated by all levels of government as the private sector lobby grows.

This represents a remarkable turnaround on the part of the McGuinty Liberal government, who campaigned against using P3 financing, recognizing three years ago that these projects cost more and deliver less. In 2003, McGuinty not only attacked the Tories for developing two new hospitals this way, but vowed he would bring these hospitals back into the public sector. “We believe in public ownership and public financing,” he said at the time.

Private hospital deal expected to cost $300 million more

Only a year after these remarks, McGuinty signed the two private deals the Tories set up for the William Osler and Royal Ottawa Hospitals. The government has been fighting in the courts since to keep these deals out of the sight of the public. Dalton McGuinty has a good reason to – government is not contesting the $300 million estimate in added costs advocates say the public will be paying for the Osler deal. That’s $300 million more than it would cost to use public financing of the building.

With 28 hospital projects announced in the fall, and the new Woodstock General Hospital announced recently, the extra costs of these projects could be crippling to future government finances.

Layoffs, job cuts and scandals

When money gets tight, the first place to cut costs is usually through layoffs and job cuts. When the United Kingdom went down the P3 route to finance public hospitals, an average of 30 per cent of staff – both clinical and support -- had to be cut at these hospitals to balance the budget. In 2002, when most European countries were cutting taxes, Britain was forced to raise taxes to cover this huge legacy of debt.

British P3 hospitals also became scandal-plagued amid faulty construction and questionable land deals that resulted in huge profits to the private consortiums.

In Nova Scotia, a pro-privatization Tory government had to cancel a P3 school construction program amid cost overruns, scandals and lack of public control. In Hamilton the city had to take back its water service after poor performance by several P3 consortiums. And we all know about how much control the government had over the skyrocketing costs of P3 Highway 407 – none. It’s no wonder David Caplan prefers to call these projects AFPs, and not by their real name.

We can fight back!

The course of events is beginning to change. The P3 Union Station deal in Toronto recently collapsed after the private consortium was unable to meet the terms set out by City Hall. The announced P3 hospitals are having the scope of private control scaled back. Many communities are taking back their water services after poor performance by large international water companies. We cannot stop now.