Privatization and Public/private Sector Partnership

By Kennedy, Larry | Canadian Parliamentary Review, Autumn 1995 | Go to article overview

Privatization and Public/private Sector Partnership


Kennedy, Larry, Canadian Parliamentary Review


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 governments alone.

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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.

Privatization maybe 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.

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