P3 privatization schemes a failure in country that invented them | National Union of Public and General Employees

P3 privatization schemes a failure in country that invented them

What's being done in Britain will look very familiar to Ontario residents who saw how P3 privatization schemes were rebranded in that province.

Ottawa (30 Oct. 2018) — The British governments announcement that it will stop using the most common form of P3 privatization schemes in Britain — Private Finance Initiative (PFI) — shows that in the country that invented them, P3s are seen to have failed. Unfortunately for the British people, the British Conservatives appear set to do what privatization proponents around the world have done when a privatization scheme fails so badly it can no longer be defended — rebrand it under a different name.

British Conservatives first to use P3 privatization schemes

What makes this week’s announcement significant is that the British Conservative government was the first in the world to use P3 privatization schemes. They were announced in the 1992 British budget and the first one opened in 1995.

Because P3 privatization schemes offered a way to borrow money without it appearing on the government’s books, the Labour government that replaced the Conservatives in 1997 continued to use them. By 2017 there were 715 PFI projects. There were also a growing number of PFI schemes that used a different model than PFI.

P3 privatization schemes pushed up the cost of public services

The impact of P3 privatization schemes on the cost of public services in Britain was the same as in Canada. A combination of higher borrowing costs and higher administrative costs dramatically increased the cost of projects where P3s were used. Because of the higher costs of P3s, the government has had to bailout or take over several hospitals that would otherwise have gone bankrupt.

What will also be familiar to Canadians is the impact of P3 privatization schemes on the quality of service. Just as in Canada, a combination of private companies cutting corners to increase profits and the higher cost of P3s has led to problems.

As a result of the higher costs and poorer service, PFI is universally recognized to have failed. It is a measure of how badly P3 privatization schemes have failed that even the British Conservatives — the party that invented P3s — are now critical of them.

But as has been done with other privatization schemes that failed, the British government is planning to rebrand P3s rather than abandon them. In the same speech in which he claimed the government was abandoning PFI, the Chancellor of the Exchequer (the finance minister) said, “I remain committed to the use of public-private partnership where it delivers value for the taxpayer and genuinely transfers risk to the private sector.”

When privatization fails, rebrand it

While the privatization industry has not been good at running public services, it has been very good at sweeping its many failures under the rug.

What's being done in Britain will look very familiar to Ontario residents who saw how P3 privatization schemes were rebranded in that province. After serious problems with a P3 hospital in Brampton were uncovered, the Ontario Liberals announced they were scrapping P3 privatization schemes. Then they continued them under the name Alternative Finance and Procurement (AFP). Infrastructure Ontario was created to provide expertise for infrastructure projects, but ended up being a publicly funded lobbyist for P3s.

In Britain P3 privatization schemes have already been rebranded once. In 2012, they were renamed PF2 and the government of the day claimed they were nothing like the discredited PFI schemes they replaced. Now as PF2 is shown to be no different than PFI, the government is embarking on another rebranding exercise.

If inventors disown their invention, why use it?

The money investors, law firms, consultants, outsourcing companies, think tanks and others are making from P3 privatization schemes means they will fight to keep them going as long as possible. But when the political party that invented them, the party of Margaret Thatcher, acknowledges the problems with the privatization schemes they invented, there is no reasonable excuse for continuing to use them.


NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 390,000 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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