Privatizing public services: electoral gain for economic pain

licenseSo, let me see if I understand this correctly.

Nova Scotia’s Department of Motor Vehicles takes in $120 million a year to register vehicles, peddle license plates, test drivers, promote highway safety, etc. The DMV costs $30-35 million a year to operate, meaning it nets the provincial treasury $85-90 million a year.

But the DMV’s technology needs upgrading — to the tune of $30 million.

So, instead of borrowing to do that and amortizing the costs over a period of years as governments usually do, Service Nova Scotia Minister Mark Furey mused last week about shopping DMV services — along with those provided by provincial land and stock registries — to the private sector.

He’s more than musing.

Mark Furey

Mark Furey

Last year, his government quietly hired consultants Ernest & Young to look into whether outsourcing — government-speak for privatizing — these functions made sense. Furey has its report, but he won’t tell you what it says, or let you read it because that could compromise the government’s negotiating position with potential private sector partners.

Uh… just musing?

Despite what Furey claims — privatizing would allow for “significant cost avoidance” and allow the government to focus on providing “core services” — this isn’t about delivering better service, providing service more efficiently, or even saving the government money in the long run.

It is about making the books look good — and eliminating as many public sector workers as possible — before the next provincial election.

When the Manitoba government did what the Nova Scotia government is poising to do, its private sector partner absorbed the cost of the upgrade, paid the government a $75-million signing bonus and promised to pay annual royalties of $11 million rising to $24 million by the end of the 30-year deal.

Let’s do the math. Nova Scotia could borrow $40 million at today’s low interest rates, pay it off over time and continue to net close to $85-90 million annually instead of, well — tops — $24 million.

That makes sense economically.

But borrowing would add to the appearance of provincial debt (bad) while the $75-million signing bonus could help government magicians make the deficit appear to disappear in the lead up to a provincial election (very good).

Makes sense politically.

Guess which option will win out in the end?

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Copyright 2015 Stephen Kimber, Website
  1. Not wanting to sound too cynical but the electoral process has become much less about good government and more about power (remaining in government), that’s why I agree fully with the points made in your article. Moving these jobs from the public sector to the private sector is not about efficiency or savings it’s about fudging the books so they look better in preparation for the next election and it is as well about cutting public sector jobs which will be replaced by lower wage and benefits private sector jobs, it’s not about the private sector being better rather it’s about union busting! It’s not about Democracy! It’s not about good government! Simply put it’s about maintaining power which is about getting re-elected!

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  2. Further to Doug’s comment, there is a long way to go on this and how it is structured will make all the difference in determining whether it makes sense. My most recent experiences with Access NS have not been great. When you finally get to the wicket the service and staff are both fine, but wait times can be ridiculous and there is an obvious lack of consideration for the customer experience. Add to that a very checkered past in terms of their implementation of new technology systems, with delays and large cost overruns, and you can begin to understand why they are looking at other options. Let’s wait and see what is proposed before instantly condemning the idea.

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  3. PC Premier Donald Cameron sold our power corporation off to the private sector. Name one happy customer. Only a happy supplier and 105-guaranteed-return-investors. Surely, Cameron had the best interests of the province at heart.

    Liberal Premier Steve MacNeil may end up selling off our profitable registration services, if we let him. Are we ready to just let it happen? Contact every MLA you can and let them know how much you’d like to see more divesting of provincial assets, for a quick but short buck. (What kind of computers do they need that cost $30 million?)

    I wonder what current PC leader Jamie Baillie says about this privatization “genial” idea? I posted the question to his FB page but no answer, 4-5 days after.

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  4. You are right to warn us but your conclusion is premature. I am a big believer in professional public services – as you know – but in truth there is nothing inherently public about these actual services in this instance. It is a retail service and the public policy aspects of it – locations, open hours, prices, wait times, etc – can be set by government without actually having to provide the service. On the other hand I’m not one who thinks the private sector automatically provides better service than the public sector. I’ve never failed to be well and cheerfully served at Access Nova Scotia, something I can’t say about many of our most esteemed retail operators. My only point at this stage is that this could be a bad thing or a good thing – it could even be a good thing badly handled – we should watch it closely but we should resist the tendency to jerk either our left or right knee.

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