Defend Public Healthcare

After repeated  British reports revealing failure   of public private partnerships (P3s) for public infrastructure projects, the British Chancellor has announced a fundamental review of the government's use of P3s (or, as the Brits call them, PFIs) .   A recent House of Commons Committee report put the cost of capital for a typical PFI project at 8%, which is double the government rate of around 4%.  And for capital intensive projects like new hospital buildings, that adds up to a whole lot of extra cost for the public to swallow.   Chancellor George Osborne said    “We have consistently voiced concerns about the misuse of PFI in the past and we have already taken steps to reduce costs and improve transparency... We want a new delivery model which draws on private sector innovation but at a lower cost to the taxpayer and with better value for public services.” The Financial Times suggests that the government wants more "direct" private sector investment in p

After the failure in October of Dexia, a major European bank, a top leader of MF Global said that other financial service businesses may fail. Only too true. Now MF Global itself has been brought down by the European financial crisis.Serious signs of problems  appeared  last week when MF Global's credit rating was downgraded. The risk taking by MF Global was seen as too great. Notably, the second major financial services business to fail due to the European financial crisis is North American. So much for all that talk that the US financial institutions were not seriously exposed to the European crisis. Despite the ongoing crisis in the financial service industry there is still no sign that Ontario, or other Canadian governments are rethinking their move to use the private finance industry to develop public infrastructure projects, like hospitals, through "public private partnerships". Nevertheless, the troubles in that industry are growing. The failure of M

The British Construction Products Association (CPA) is forecasting a 30 per cent fall in health sector construction work this year, followed by a 15 per cent fall next year, with further declines in 2013 and 2014.   Health construction work is expected to fall from a peak of around £5.2 billion in 2008, down to £2.4 billion in 2014, even adjusted for inflation, industry paper  H&V News reports. Kelly Forrest, CPA senior economist, put the collapse down to uncertainty over public private partnerships (P3s or, as the British refer to them, private finance initiative or PFI) . P3s have been harshly criticized in recent months in Britain, with the National Audit Office and Parliament’s Treasury Select Committee calling them out, among others “We think it will be a while before PFI returns to the health sector,” said Kelly. Ontario, meanwhile is still officially planning to expand its use of P3s for hospitals.

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 credi

With public sector austerity in Britain, the National Audit Office has reported  20 hospitals "are  not financially or clinically viable in their current form. "  The report also indicates that British Department of Health advisers have found that   up to 6 of the 22 hospitals with public private partnerships (P3s) "were not viable under any of the tested scenarios" because of the scale of their P3 (or as the British refer to them "PFI") payments and other financial problems.  The Audit Office reports that "tackling the financial problems faced by some of the most challenged (hospital) trusts will require direct intervention" by the government, including "addressing the affordability of PFI  schemes."   The Audit Office notes that the Department of Health now "acknowledges that external financial support may be needed for a small number of trusts with large PFI schemes."    Conservative Health Secretary, Andrew Lansl

Now even Canadian Finance Minister Jim Flaherty and Bank of Canada president Mark Carney are flagging the peril of a bank crisis in Europe (or, more accurately, a bank crisis starting in Europe). The CBC reports "Flaherty has been pressuring his European colleagues to move faster on measures to shore up the cash reserves of the biggest European banks. Carney has warned the region is "extremely vulnerable" to recession if bank cash isn't adequate.  Those banks hold large numbers of loans made to Greece and other troubled governments, and the value of those assets could drop substantially should Greece default." But, the CBC adds,  recent moves by credit rating agencies have underscored the need for action soon to prevent a loss of confidence from undermining the governments and banks of larger European economies: On Thursday, Standard & Poor’s cut Spain’s credit rating for the third time in three years. Moody's Investors Service has warned Belg

The failure of a public private partnership (P3) long term care home in BC is driving down its workers wages once again. Our sister union, the Hospital Employees' Union (HEU) states : At Parksville’s Stanford Place, more than 200 health care workers were told by an arbitrator that they must accept significant wage rollbacks and benefit cuts in order to keep the facility’s private operator financially viable.  The rollbacks take more than $1.25 million out of wages and benefits in each of the next two years and will leave some of the workers among the lowest-paid health care workers on the Island with wage cuts as deep as $3 an hour. The HEU opposed the rollbacks arguing workers should not have to shoulder the costs for the operator’s failed business plan or the Vancouver Island Health Authority’s (VIHA's) failure to recognize that the public-private partnership (P3) was not viable. Stanford Place was approved for construction by VIHA in 2006 as a P3 and opened in 2008. T

A large part of the troubled assets of Dexia (the failing Franco-Belgian bank) are on the balance sheet of Dexia Credit Local, a French unit of the bank. Bloomberg reports the unit has  € 21 billion of Greek, Italian, Portuguese, Spanish and Irish sovereign debt. Dexia Credit Local is also the unit of the bank involved in all four of the bank's public private partnership (P3) projects in Ontario. The Ontario P3s include three hospitals and a highway. Standard & Poor's downgraded the credit ratings on three Dexia units, including Dexia Credit Local, on Thursday, citing the group's limited access to wholesale funding markets. The ratings are on credit watch with "developing implications", S&P said. The French, Belgian, and Luxembourg governments stepped in over the weekend. Belgium will nationalize the healthy Belgian part of the bank and other parts will be sold off (e.g. Canada's RBC is in very advanced talks to buy out Dexia from their jointly

Update : Earlier today the board of the failing bank Dexia approved a rescue plan drawn up  over the weekend by the governments of France, Belgium and Luxembourg. The bank's Belgian unit will be nationalized and its other divisions sold. Dexia will receive up to €90 billion ($120 billion) in taxpayer guarantees, mainly from Belgium, to shore up its funding, according to the Wall Street Journal . Dexia is involved in numerous public private partnerships, including four in Ontario. A second European bank, Erste, has now put out a profit warning.   Erste now expects a loss of nearly €1 billion this year (instead of an expected €1 billion profit).   Erste has shelved for at least a year a plan to repay 1.2 billion euros of aid from the Austrian government.  There is speculation that more banks may fess up to such losses later. European governments have now postponed the planned European Union summit one week (until October 23) to allow more time to develop a response to the ne

Europe's latest failing bank, Dexia, is involved in at least three hospital public private partnership (P3) projects in Ontario: Halton Healthcare , Bridgepoint and CAMH , as well as the Windsor Essex Parkway P3 project. The British government has said it does not expect Dexia's situation to affect the viability of P3 projects in Britain. So far, there is no word from the Ontario government on this point. Will the financial crisis spread? Quite a few banks were downgraded by credit rating agencies late this week, following the crisis at Dexia and declining confidence in the financial system. Ominously, the New York Times reports " European banks are reluctant to lend to one another, and United States lenders are reluctant to lend to European institutions. Banks have been unable to sell bonds to raise money." Dexia has, however, held on to an investment grade credit rating due to the financial commitments from the French and Belgian governments to backstop the

The 'F' in question is, of course, 'Finance'. As in the Design, Build, and Finance (“ DBF”) of public infrastructure projects by the private sector (as is common nowadays for Ontario hospital projects). Europe is wobbling towards another financial crisis as the banks begin to show signs that they are afraid to lend to each other. Governments are already spending billions to prop up banks in one way or another, but a trillion dollars or more may be needed, some suggest . The Economist has called fo r " simultaneous injections of capital into the region’s banks" as soon as possible. As with the last go around (just three years ago) no one knows which businesses will make good on their promises, and which will fail. That drives up the cost to finance infrastructure through private finance relative to public finance. As a result, a f inancial crisis will drive up the costs of public private partnerships (P3s) -- aka "DBF" projects.

Dexia, one of Europe's larger banks, is also one of the larger backers of public private partnerships. The Guardian reports it has been involved in about $9.36 billion worth of P3 projects in Britain. Dexia has also been involved in three P3s in British Columbia, two hospitals and a bridge. As of today, the bank has fallen on hard times, connected to fears about its potential loses in Greece. So it is now on the verge of receiving a bail out from (who else?) the public. This is the second time around for Dexia in just three years: the bank had to be bailed out by France and Belgium during the 2008 banking crisis with $6.92 billion of taxpayers' money. ( Apparently these guys truly do believe in PUBLIC private partnerships.) Dexia may be just the first to go if there is a new round of bank crises. If so, more P3 financiers may need a public bailout before it is over. “Dexia is by no means alone in terms of being at risk here,” said Simon Maughan, head of sales and distributio

The Ontario government is launching a massive drive to bring many more public private partnership (P3) hospitals to Ontario. While this is getting little play in the election, this form of privatization will have major consequences for Ontario. England  started the P3 (or "PFI") craze, launching a similar, massive P3 drive over a decade ago.  They are now beginning to regret it dearly, with 60 hospitals falling into financial crisis due to their P3 deals.   Here are some of the results in England   according to  the normally conservative newspaper,  The Telegraph  : The taxpayer owes a total of £121.4 billion on P3s  projects -- although they are worth only £52.9 billion. Next year’s P3 bill alone will be £8.6 billion (a little under  $14 billion ) The National Audit Office reported in April that that each household will have to pay nearly £400 ($632) next year. Young people starting work this year will pay taxes for the P3s until they are nearly 70

The stream of terrible news about public private partnerships (P3s) in the motherland of P3s just keeps on coming.  But no one seems to be paying attention in the Ontario government.      Now 60 English hospitals are on the brink of collapse  due to their P3 deals  according to the British Health Secretary (like our Minister of Health) .   Here's commentary from the conservative British daily, the Telegraph  on the latest P3 (or "PFI") fiasco: Andrew Lansley, the Health Secretary, has revealed that hospital trusts are "on the brink of financial collapse" because of the "crippling" servicing costs they are paying to private companies which built infrastructure under Labour. Remarkably, it turns out that this method of providing big capital projects, beloved of Gordon Brown, is rather more expensive than simply borrowing money from the bond markets and using it to build a hospital. Of course, anyone should have been able to guess this: there is no wa

Even more concern about P3s (public private partnerships) in Britain has emerged.  This time that they might disadvantage English based manufacturing.   Bombardier lost its position as the favorite for a  £1 billion Crossrail train contract when the government moved to fund the deal through a P3, the Guardian reports .   The problem?  Bombardier's German based competitor, Siemens,  has better access to financing than Bom bardier.   "A large company like Siemens will be able to borrow the money to undertake a project of this kind,"  Tony Travers, director of the Greater London Group at the London School of Economics, warned.  Indeed,  Siemens's superior financial firepower is thought to have been a factor in their victory over Bombardier for a recent Thameslink deal that caused Bombardier to announce it would layoff 1,400 workers at a British factory.   This dynamic is likely even more relevant to Canada than England. Our  local business class is not among

Just when I thought the authorities couldn't possibly  find any more problems with public private partnerships (P3s) in Britain, another revelation comes along.  This time from the Public Accounts Committee of the House of Commons.  Here's the Guardian's account of the latest P3 (or, as the Brits call it, "PFI") scandal,   Investors 'using tax havens to cash in on PFI contracts' : City investors have made bumper profits from taxpayers by buying up the contracts for schools and hospitals funded through the private finance initiative and taking the proceeds offshore, the public accounts committee warned on Thursday.  "They're milking the PFI system for profit," Margaret Hodge, the Labour MP who chairs the committee, told the Guardian, accusing Treasury officials of being "dreadfully complacent" about tackling the issue. ... in a highly critical report, the cross-party committee says the PFI became "the only game in town"

The House of Commons Treasury Select Committee in Britain " rubbished " PFI (i.e. Public Private Partnerships or "P3s") on Friday, but the problems for P3 hospitals are only just starting. The business friendly Sunday Telegraph has gotten its mitts on government documents which indicate that the cost of hospital P3 deals signed since 1997 "will swell by almost one quarter from 2011 to 2014". This will mean that the hospitals are going to have to find (what is euphemistically referred to as ) "efficiency savings".  The Telegraph story Hospitals to cut services to pay for £60bn private finance deal  reports that the hospitals are already drawing up the plans for the required "savings". Payments by hospitals to P3 corporations  will grow by almost £1 billion during the next payment review from 2011 to 2014. Of a total £60 billion debt owed to the P3 corporations "less than £5 billion will have been paid to them by the time of

As noted earlier , Britain's largest nursing home chain, Southern Cross is going kaput, and despite all the chatter from government proponents and business about how such public private partnerships (P3s) transfer risk from the public to the private, it is the most vulnerable members of the public who are taking it on the chin.     Some useful comments from Max Pemberton of Britain's leading (and normally conservative) newspaper  The Telegraph on how this privatization deal transferred the risk to the elderly and most vulnerable:  While the Government insists that no residents will end up homeless as a result of Southern Cross’s collapse, ministers have been unable to give assurances that residents will not have to be placed elsewhere. There is a wealth of research to show that moving individuals who are settled in nursing homes has a severe impact on their well-being. There is a clear correlation between such upheaval and an increase in morbidity and mortality. There i

Southern Cross, the giant British nursing home operator, is shutting down after months of financial troubles.  Until now, this giant for-profit corporation ran 752 nursing homes with 31,000 elderly and vulnerable residents.  A spokesman for British Prime Minister David Cameron said no one would be left homeless, adding that local authorities have a duty to make sure people received the appropriate care.  According to the Southern Cross  plan , 250 homes will be transferred to landlords. The landlords of the remaining 500 homes are still "finalising their plans" however. Southern Cross had profited by buying a  huge number of nursing homes and then realizing a cash bonanza by selling them to property companies and renting them back. But when government squeezed funding, Southern Cross continued to face steep rents and failed.    Southern Cross workers  interviewed   by the business newspaper the  Financial Times spoke of a deterioration in standards over the past year,

The  Windsor Star  has called for the resignation of the Health Minister over  the Windsor long term care public-private partnership (P3) that recently fell apart.  The Star has also called for  a review of the project by the Auditor General. The Grace Hospital saga continued this week as a Ministry of Health spokeswoman admitted the province was "not aware" developer Lou Vozza was facing a mountain of civil judgments in 2009, just as the Liberals were expanding the scope of his contract to build a longterm care facility. As the number of claims against Vozza became public - almost 30 parties were registered in Superior Court on June 24, the day the contract was finally cancelled - the sense of disbelief continued to grow. How was it possible that Health Minister Deb Matthews, who just three weeks ago expressed faith in Vozza's ability to get the job done, would be oblivious to his financial woes from the get-go? How could she be "very pleased" with his p