At the time this article was a
written Larry Kennedy was a member of the New Brunswick Legislative Assembly
representing Victoria-Tobique. This article is based on his presentation to the
34th Canadian Regional Conference in Halifax in July 1995.
Rocketing debt and diminishing
revenues has led to a determination on the part of governments to balance
budgets, to down size government and re-evaluate long-standing functions and
services. Government leaders and legislators in Canada have two basic ways of
getting control of deficits and charting a future course of action for the rest
of this century. One of these is through the downsizing of government activities.
The other is by privatizing some of its operations. There are mixed views on
the down sizing of government through reduction of public service positions.
Nevertheless, a reduction of 40,000 federal employees has already been
announced and in the provinces the number of public servants is also being
reduced either by lay-offs or by attrition. There will be an overall reduction
in the number of public employees in Canada in 1995. This article looks at some
of the factors pertaining to the other tool available to cost conscious
governments — the privatization or the establishment of public/private
partnerships to carry out some of the functions formerly performed by
For legislators, privatization
presents complexities that can be even more troublesome than downsizing. It is
a political mine field. Some see it as the greatest thing since sliced bread.
Others view it is a curse of modern society. Is it a means of preserving
essential public services? Is it a government sell-out? Is it a technique of
modern government management? Is it all of the above? Love it or hate it,
privatization is very much with us and a part of government planning which is
likely to be around for a considerable period of time.
The idea of a diminished role for
government was put forward by Margaret Thatcher in the United Kingdom and by
Ronald Reagan in the United States. New Zealand's recently underwent a massive
turnover of functions to the private sector. Privatization has come to the
forefront in several provinces, including British Columbia, Saskatchewan and
Alberta. The federal government seems very much bound on this route.
Canada traditionally had been a
mixed economy and crown corporations were created over the years to provide
services that the market could or would not supply. They have long conducted
business operations for profit although often deficits resulted. In the last
decade there has been a move to privatize a number of crown corporations.
So long as the public interest is
preserved, it is increasingly difficult to argue against privatization of many
crown corporations which in essence are involved in business operations, and in
some cases compete with the private sector.
It is my view that the test for
privatization of any crown corporation must be, "will privatization
service the public interest?"
To pass this test, there must be no
fire sales of government assets in any privatization. There must be a clear
commitment that service to the public will continue. A remedy must be available
in the case where privatization fails this test.
Governments in Canada are
increasingly interested in privatizing crown corporations either to obtain
revenue, or get rid of assumed debt, or both.
Privatization may be viewed as a
public/private sector partnership. In exploring this partnership, there are
means other than outright sale of crown corporations to the private sector.
Sir Graham Day, a Nova Scotian,
suggests that one approach with respect to crown corporations might be the
creation of "half-way" houses, with government ownership but private
operation on a contractual or franchise basis, preserving basic and essential
services at lower cost. This contracting out, with private management and
delivery of services, is a concept that could prove interesting in a cooperative
effort between government and the private sector.
The New Brunswick Experience
The New Brunswick approach has been
built much more on making government efficient than all-out privatization. The
goal has been one of achieving self-sufficiency to deal with the debt crisis
evident when the current government came to power in 1987. Responsible fiscal
management became a way of life in our province. The agenda has been reducing
layers of bureaucracy and making government smaller and more efficient. New Brunswick
has managed to balance its budget and is determined to live within its means.
It has balanced budget legislation on its books. The government has not just
cut, it has worked to a plan.
Reforms have been made in social
policies. Pre-school and early intervention programs have been developed and
put in place. The government has attacked built-in disincentives toward work
and self-sufficiency. Social welfare recipients are provided with training and
upgrading to improve skills and encourage them to move toward the work place.
New Brunswick is involved in
cooperation with the private sector in this direction. Some liquor outlets have
been provided in rural areas through a franchising arrangement with the New
Brunswick Liquor Corporation. Recently a school was built in the Moncton area
by a private development group that will lease to the government and be
responsible for maintenance. The result will be a reduction in borrowing costs
for initial capital outlays, and fiscal responsibility, with a "paying as we
go" approach. New Brunswick is currently in the process of having a
private contractor build and run a facility for juvenile offenders.
New Brunswick has been involved
successfully in what I might call "creative privatization" in a
working partnership with privately owned NBTel. The provincial government has
been able to promote a job creation program involving call centres and high
tech operations through a positive working relationship with NBTel, which
provided our province with the first totally fibre optic wired phone system in
North America. The result is that New Brunswick is now recognized as a leader
in call centres. This has been done, not through government assuming burdensome
financial commitments, or the creation of a crown corporation, but rather a
strategic alliance with an advanced communications firm.
Where the private sector can do the
job better, and preserve and protect the public interest, that should be the
direction followed. But in the cooperative efforts of privatization involving the
public and private sector, the first step in determining whether to privatize
or not to privatize come down to this: the impact on people and the affected
workforce. Their interests must be recognized as legitimate and safe-guarded.
Overall, will the result be positive or negative? I believe that we need to
ensure that the result will not be negative, and be prepared to give the
benefit of any doubt to this finding.
Privatization and public/private
sector cooperation can be worked out where crown corporations are involved.
However, a much more difficult problem arises when one considers the exacting
privatization of provision of services that had formerly been regarded as a
In this area experience shows that
employees transferred to the private sector in the move towards privatization
can suffer economically and end up with reduced benefits. It is increasingly
the situation that employees who are not transferred, while obtaining pay outs
for years of service, find themselves unable to obtain comparable employment in
the private sector work place.
Citizens have come to rely on the
role of government in providing a social safety net. It raises the issue of the
duty of government towards its citizens. A former Chair of the Economic Council
of Canada succinctly states what many now consider a modern reality and
challenge for government: "We have to break with the notion that
governments can protect citizens from every cold wind." On the other hand
she warns governments of their responsibilities: "We have to break with
the notion that governments can let cold winds blow to make Canadians
competitive, without putting in place the supporting reforms on the social
Not everyone remembers both sides
of this equation. The views of government minimalists are being increasingly
put forward by commentators and right wing think tanks. One of those expressing
the minimalist view is Andrew Coyne, editorial writer for the Globe and Mail,
who argues government should be given less to do, should be limited to a few
simple tasks to be performed according to a few very simple, well understood
unchangeable rules and to make markets rather than politics the primary
mechanism through which society's resources are allocated. This view would
appear, would carry privatizing to the extreme.
I believe that to have the public
and private sectors successfully work cooperatively together, we need two
important elements in play. Red tape should be kept to a minimum. And the government
must commit itself to the creation of a climate of economic confidence.
We know that in the years
immediately ahead we face down sizing in government and more privatization.
Hopefully continued private/public sector cooperation can succeed. However, we
have to understand very clearly that Canada is not the United States, or
Britain, or New Zealand. Ours is a different political culture. We have built a
country and a sharing, caring society in spite of both economics and geography.
We must make sure that government's quest for the bottom line never loses sight
of the fact of why we have government in the first place in a civil and
civilized basis. That has to remain clearly before us as we deal with the role
of government, regardless of the issue. That should be the starting point, not
the after thought, which at times can be the case in considering privatization.