Private finance: transfering the risk (to the public)

A week ago, it became apparent western business and political elites were contemplating a €1 trillion bail out for the mess in the European banking system. Then, by late last week, Bank of Canada president Mark Carney urged €1 trillion in funds or "a little bit more"; he was shortly followed by the British Chancellor who called for €2 trillion. Over the weekend the proposals began stretching up to €3 trillion. Here is a report from London's Telegraph:

Germany and France have now agreed the principles of a €2 trillion to €3 trillion rescue plan. Mr Osborne said they had just seven days to come up with “something quite impressive”. Details will be thrashed out this week but there now appears to be consensus around the core measures – to increase the firepower of the eurozone bail-out fund (EFSF) from €440bn to around €2 trillion, to recapitalise the banks with €100bn-€200bn, and to devise a credible programme for Greece, including losses for private sector creditors of as much as 50pc.

Despite intense opposition from banks, it now seems the banks will have to accept much higher loses, effectively ripping up the deal reached in July. If so, banks will need more government cash to survive.

But if the scheme fails, governments will be on the hook for huge loses.

And Ontario's use of P3 private finance?

Bankers (etc.) justify public private partnerships (P3s) with the claim that the extra costs associated with private financing of public infrastructure are offset by the risk transferred from the public sector to the private sector.

Even when the banking system is not in crisis, P3 critics pour scorn on these claims and scoff at the millions and millions of dollars the public is required to pay for the risk 'transferred'.

But bank crises undermine both aspects of the bankers' case for P3s. The bank crisis drives up the relative cost of private finance compared to public finance and the bailout of the banking system by public authorities shows yet one more way that the risk is not really transferred to the private sector.

Officially, Ontario plans to entangle itself much deeper into private P3 financing. Public infrastructure projects worth billions and billions are being caught up in this, even as the problems in the private financing world are mushrooming.

Hopefully, someone in the Ontario government is considering other options. But who knows?

Cartoon Link: American Progress

Comments

More spending on new hospitals and new beds? Nope

Hospital funding: There is something off about the provincial government's Budget claims on hospital capital funding (funding to build and renovate hospital beds and facilities). For what it is worth (which is not that much, given the long time frame the government cites), the province claims it will increase hospital capital spending over the next 10 years from $11 billion to $20 billion – or on average to about $2 billion per year. But, this is just a notional increase from the previous announcement of future hospital capital spending. Moreover, even if we did take this as a serious promise and not just a wisp of smoke, the government's own reports shows they have actually funded hospital infrastructure about $3 billion a year over the 2011/12-2015/16 period. So this “increase” is really a decrease from past actual spending. Even last year's (2016-17) hospital capital funding increase was reported in this Budget at $2.3 billion - i.e. about 15% more th

Ford government fails to respond to 72% increase in COVID inpatient days, deepening the capacity crisis

COVID infections continue to drive up hospital costs and inpatient hospitalizations in Ontario. For the most recent fiscal year (April 1, 2022- March 31, 2023) hospital stays related to COVID cost $1.221 billion, according to new CIHI data. This is about 4% of total hospital spending, creating a very significant new cost pressure beyond the usual pressures of population growth, aging, inflation, and rising utilization. Costs for COVID related hospitalizations increased 22.2% in Ontario in 2022/23 from the previous fiscal year, rising from $999 million to $1.221 billion. That rise is particularly notable as the OMICRON spike of late 2021 and early 2022 had passed by the the 2022/23 fiscal year. The $222 million increase in COVID hospitalization costs came in the same year as the Ford government cut special COVID funding and, in fact, cut total hospital funding by $156 million. In total, there were 60,653 COVID hospitalizations in Ontario in 2022/3, up from 47,543 in 2021/2.

Paramedic Services in Canada: Structure, Privatization, Unionization and other issues

Governance and Funding : While police and fire services are usually municipal services, Emergency Medical Services (EMS) are typically controlled by provincial governments. In Ontario, regional municipal governments have responsibility for delivering and funding EMS. But even in Ontario the province plays a key role, strictly regulating EMS, providing funding for 50% of the approved land ambulance costs, and paying 100% of the approved costs for air ambulance, dispatch, base hospitals, First Nation EMS, and for territories without municipal government. Delivery : Like police and fire services, EMS is predominantly a publicly provided service in Canada. But businesses have now made some significant in-roads into EMS, primarily Medavie, a private corporation based in the Maritimes that describes itself as not-for-profit. Medavie goes back over 70 years, with its roots in health insurance. It still operates Medavie Blue Cross with 1,900 employees. It now a

Defend Public Healthcare

Search This Blog