Federal advisory council recommends widespread privatization

As the federal government considers privatizing 8 Canadian airports, NUPGE President says, “If you’re afraid to even use the word privatization, how on earth can you even pretend it's good public policy?" 

Ottawa (25 Oct. 2016) — If implemented, the recommendations of the federal government’s Advisory Council on Economic Growth would result in widespread privatization of airports, roads, bridges, transit lines, water systems and other public infrastructure. As a result, Canadians would be paying the cost of privatization through skyrocketing user fees, poorer service, and higher taxes.

There would also be a loss of accountability and control as key decisions about what infrastructure gets funding and how it is built would be made by an appointed board of directors based on what projects were most likely to attract private investment.

“Whether a road, rapid transit line or water treatment system gets built should be based on what people need, not how much of a profit it’s going to make for private investors,” said Larry Brown, President of the National Union of Public and General Employees (NUPGE).

Harper-era privatization schemes revived and expanded

What the advisory council recommends in its report, Unleashing Productivity Through Infrastructure, released on October 20, bears a striking resemblance to Harper-era privatization policies. These policies were intended to pressure all levels of government to use P3 privatization schemes. The difference now is the advisory council recommendations also threaten existing public infrastructure.

The recommendations call for a Canadian Infrastructure Development Bank (CIDB) to have a major role in deciding which projects get funding and how they will be built. As the main objective of the CIDB will be maximizing private investment in infrastructure, the CIDB will be pushing P3 privatization schemes every bit as hard as PPP Canada, the organization that the Harper Conservatives set up.

What is new is the recommendation that existing federal assets that are potentially profitable be sold off to encourage private investment in other public infrastructure. Canada’s 8 largest airports have already been identified as a potential target.

Advisory council ignores privatization costs like investor profits

"It is a lot cheaper for governments to borrow money than to privatize a service and pay private investors enough to cover the profits they expect," said Brown. "The federal government is paying 1.8 per cent interest a year on 30-year bonds. Investors in infrastructure expect between 7 and 9 per cent a year."

The advisory council ignores the fact privatization pushes up borrowing costs. Instead, private investment is treated as free money.

“If the privatization industry portrays private investment in public services as free money, hold onto your wallets,” Brown continued. “That means the privatization industry is trying to hide how costs will be paid and we should expect sky-high user fees or service cuts”

Loss of public accountability and control

When a public service is privatized, the public lose control over how that service is run and they lose the right to know how decisions are made about a service they rely on and fund. Instead of viewing that as a problem, the advisory council appears to view loss of public accountability and control as an advantage.

The report's identification of types of infrastructure where user fees can be charged as prime targets for privatization makes it clear that the advisory council sees user fees as the way to fund its privatization schemes. But, with the profit margins private investors expect, that will only be possible if user fees are increase significantly.

If user fees for a public service are increased, the public can hold the government accountable. Privatization allows governments to pass the buck.

A good example is the privatized Highway 407 in Ontario. Since privatization, the company running the highway has increased tolls by 289 per cent.

First target: airports

The same day the advisory council released its recommendations, it was announced that the federal government had asked Credit Suisse to study how to maximize revenues from privatizing Canada’s 8 largest airports. Airports in the study are Toronto, Vancouver, Montreal, Calgary, Edmonton, Ottawa, Winnipeg and Halifax.

Currently these airports are run by non-profit authorities. Revenues are put back into the running of the airport or go to the federal government to fund other services. For investors to make a profit on privatized airports, they will either need skyrocketing user fees or to scrimp on costs like maintenance. 

Privatization industry continue to try to hide its intentions

Even though the report recommendations mean existing public services will be sold off and privatization schemes like P3s will be used for new infrastructure, nowhere in the report is the word “privatization” used. Various euphemisms for privatization are used. Instead of privatizing existing assets, the report uses the phrase, “create a flywheel for reinvestment.”

"But regardless of what bafflegab or jargon appear in the report, it’s still privatization and the cost to the public is still high," said Brown. “If you’re afraid to even use the word privatization, how on earth can you even pretend it's good public policy?"

NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 370,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE

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