2/8/11

P3 time bomb coming to Ontario?

Local authorities in Scotland face a financial time-bomb for schools built through public private partnerships ("P3s") because of a series of flawed assumptions made when they entered into contracts, according to a new analysis by independent economists. 

P3s bring for-profit corporations into our schools, hospitals and other public sector organizations by privatizing the financing and some of the operations of these organizations when new facilities are built.

Gaps towards the end of some long contracts when central government funding runs out, over-optimism on associated land sales, and an “astounding” failure to allow for inflation being higher than predicted, are all contributing to the grim picture in Scotland.

One local authority has already decided to raise taxes by 1% annually for 12 years just to honour a P3 contract.

“The consequences, both in terms of an increasing squeeze on other local authority services, and in terms of pressure for steep council tax increases, are likely to be severe. While the study covers Scotland, it is likely to have relevance in England and Wales where PFI (the British name for P3s) has also been a popular way of providing for new schools.”

Building on the British experience (and often involving British corporations), Ontario is developing numerous hospital P3 projects as well.    For more on the Scottish study see here.

dallan@cupe.ca

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