Thursday, November 14, 2013

Thursday Morning Links

This and that for your Thursday reading.

- Glen Pearson theorizes that inequality will be the defining theme of the current political era. Tavia Grant and Janet McFarland document the extreme (and continually-increasing) disparity between the top 1% and the rest of the world. And Eduardo Porter writes that education can only go so far in creating fair opportunities for everybody in the face of political and economic structures designed to leave most people behind.

- David MacDonald highlights the fact that the Cons' needless program cuts and their brand-new fire sale of public assets both reflect utter mismanagement rather than fiscal prudence:
What is substantially contributing to the surplus in 2015 is a new freeze in operational funding as well as a fire sale of assets. In the Speech from the Thrown the government announced that it would continue its freeze of operational funding. In practice what this means is that, in an uncoordinated way, individual departments will cut back services in order to meet inflationary needs. In other words, if you have the same amount of money each year and inflation increases costs, you can buy less and less every year with your constricted budget. This will mean more closures of veterans’ offices; increasingly long wait times to access EI, either due to lost employment or maternity; fewer inspectors for food and transport; etc.

What’s specifically new to the fall update is an asset fire sale. In the past, these have largely involved selling buildings the government occupies with an agreement to lease them back for a long period assuring sustained profits for new landlords, well above whatever they bought it for.  This makes poor economic sense, particularly to finance election promises in 2015.

In short, the larger surplus in the fall update is due to asset sales and service cuts, which are only partially offset by a freeze in EI premiums. There is no financial management magic here, only fewer supports for Canadians and longer term costs.
- Meanwhile, Simon Enoch discusses the glaring conflict of interest when consultants who profit off of P3 schemes are hired to determine whether they should be undertaken in the first place:
(A)ll the "big" accounting firms that advise governments on P3 proposals -- KPMG, Deloitte, Ernst & Young and Price Waterhouse Coopers -- are sponsoring members of the Canadian Council for Public Private Partnerships. Described as the premier lobbying organization for the P3 industry, the Council's explicit mandate is the "promotion and facilitation of public-private partnerships across Canada and with all levels of government." One has to question the ability of an organization to impartially assess P3 proposals when they have a stated commitment to their expansion. Secondly, as Stuart Murray explains, "because of their historic role as auditors, these major accounting firms have established a reputation for fair dealing and independence." However, as these firms have branched out into general consulting services, the dual role of both auditor and consultant creates a "potential conflict-of-interest" because accurate auditing -- such as counseling against a P3 -- might result in conclusions that could jeopardize potential millions in consulting fees. And those fees are substantial. The much-beleaguered Brampton Civic Hospital P3 registered $34 million in consulting fees alone. So it is perhaps not all that surprising that these accounting/consulting firms would regularly counsel governments on the superiority of P3s.

So here's the question we should ask when assessing the independence of these firms. Have they ever counselled a government against a P3 model? The P3 industry regularly states that P3s are not a panacea for public infrastructure and that they should only be used in certain cases. Indeed the CEO of PPP Canada, John McBride, has publicly stated that P3s are only useful for maybe 15 to 20 per cent of public infrastructure needs. But have any of these firms ever determined that conventional public procurement is the better model for public infrastructure construction? If these firms cannot point to one instance where they advised a government that a P3 model was not the best choice, while the P3 industry itself admits that only 15 to 20 per cent of infrastructure projects would benefit from the P3 approach, what does this say about the supposed "independence" of these professional accounting firms? The provincial NDP's call for an impartial assessment of the P3 school proposal that is independent of government is a welcome and prudent suggestion. However, to truly be impartial, it must also be independent of the P3 industry. Unfortunately, none of the major accounting firms can currently claim to have the requisite distance from the P3 industry to make the independent and impartial assessment that the citizens of Saskatchewan need on this issue.
- Finally, Charlotte Gray, Lawrence Martin and Rosemary Barton all offer noteworthy takes on Thomas Mulcair as a prime minister in waiting. And TC Norris, Chantal Hebert and Scott Feschuk each tell a rather different story about Justin Trudeau.

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