Private Affluence, Public Austerity:
P3s, Economic Crisis, and the Public
Response
Heather Whiteside
SSHRC Postdoctoral Fellow
University of British Columbia
• Tony Clement, then-Health Minister of Ontario (2001):
• P3 use will mean “better, faster, and cheaper” hospitals
• Jim Flaherty, then-Finance Minister of Ontario (2001):
• “The building will get built more quickly and sooner and more effectively and
efficiently than were it done solely within the (public) sector”
• The P3 model should be widely used: from “hospitals to hockey rinks”
Public-private partnerships (P3s)
P3s were first initiated in Canada in the early 1990s, but were not used in
the health care sector until 2001
• P3 hospitals now make up about three quarters of all P3s in BC and half
of all P3s in Ontario (although this is changing over time as
transportation projects are increasingly developed as P3s)
• BC:
• 15 P3 hospital/health care projects are currently in various stages of development
• Ontario:
• 40 P3 hospital/health care projects are currently in various stages of development
P3s
• A private for-profit partner designs, builds, finances, and operates
public infrastructure and services
• Lengthy (multi-decade) lease-based bundled contracts and complex
risk sharing arrangements
• ‘Build now, pay later’
• “Better, faster, cheaper”?
• Higher costs: private financing, social costs
P3 Enabling Fields
BC
Enabling legislation and
capital planning
frameworks
Institutional support
Ontario
Capital Asset Management
Framework (CAMF) (2002)
Infrastructure Planning,
Financing and Procurement
Framework (IPFP) (2004)
The Health Sector Partnerships
Agreement Act (Bill 94) (2003)
Alternative Financing and
Procurement (AFP) (2004)
Partnerships BC (2002)
Infrastructure Ontario (2005)
P3s and the 2008 Global Financial Crisis
• More expensive private financing: the interest rate spread increased
from 2% to 3 or 4% (2007-2009), private financing costs roughly 70
percent more in present value terms
• Project delays, cancellations, and financing difficulties
• Examples:
• Fort St. John Hospital P3 project (BC): a new private financing partner was brought in
• Niagara Health Systems P3 project (ON): delayed for months when the private financing
portion fell through
P3s and Austerity: Ontario
Ontario’s 2012 austerity budget cut total program spending by $17.7
billion over three years but it also committed to 30 new hospital
projects using the P3 model and 25 P3s currently under construction
• The budget uses four hospital projects as examples of P3 value for
money (VfM) superiority:
• Credit Valley Hospital in Mississauga (VfM savings of $26 million),
• London Health Sciences/St. Joseph’s Health Campus (VfM savings of $50
million),
• North Bay Regional Health Centre (VfM savings of $57 million),
• Quinte Health Care in Belleville (VfM savings of $9 million)
Hospital Base Project Costs
(construction, maintenance, and financing)
Base Costs (million)
P3
Traditional
Difference
$162.8
$152.3
$10.5
London Health
$211.8 & $49.2
Sciences & St. Joseph’s
Health Campus
$204.9 & $47.4
$6.9 &
$1.8
North Bay Regional
Health Centre
$551.7
$404.6
$147.1
Quinte Health Care
(Belleville)
$72.2
$68.3
$3.9
Credit Valley Hospital
(Mississauga)
Federal spending to support P3s
• Federal Budget 2012
• P3 Canada Fund received a $2.8 billion commitment
• Federal Budget 2013
• P3 Canada Fund received a $1.25 billion commitment
• Federal Budget 2014
• New Building Canada Fund (worth $14 billion over 10 years) has a P3 screen for
proposals in excess of $100 million
Future contradictions: P3s and austerity
• Despite being justified as better value for money, P3s will paradoxically
undermine future efforts to cut budgets since the public sector is ultimately on
the hook for more expensive privately-provided services and infrastructure
• UK P3 hospital scandal :
• Astronomical fees and hyper-inflated charges
• NHS Trust bankruptcies
• 30 Trusts have such substantial P3-related debt burdens that these organizations are
“unviable in their current form”
• In Canada: P3 hospital infrastructure costs are paid by the province, services
come out of uncertain local agency budgets (RHAs, hospital boards)
• Austerity today = future justification for privatization?
Resistance
Resisting P3s can/should be done in number of ways, including:
• Developing new and viable alternatives to private financing
(particularly at a time of austerity)
• Risk pooling
• Public Asset Fund (CCPA)
• Public Bonds
• Greater politicization: projects and policies supporting P3
institutionalization