Transformation as Privatization: On the Ontario Budget Cuts

Much buzz has surrounded the work of Don Drummond, a prominent economist, as he works to revise the Ontario budget in consultation with the governing Liberals. This "Drummond Report" ought to be seen as similar to the KPMG Core Services Review that structured Rob Ford's budget plans for Toronto. The fightback by community and labour groups has blunted much of the worst of the Ford agenda.

The Liberals, led by Premier Dalton McGuinty, are carefully trying to message "smart cuts" versus a Ford-style slash and burn. The basic message is that the coming round of austerity will be intelligently managed and focused at programs that do not work, rather than across-the-board reductions. The idea is that spending will be "leaner" but not "meaner". The key phrase being used to shape this agenda is "program transformation".

Another difference from the Ford agenda is that the Liberals are likely to concede a range of revenue measures up front. Spending cuts will be "balanced" against revenue increases, such as possibly foregoing remaining corporate tax cuts, closing some spending through the tax system and perhaps even a modest general increase in revenue. The government also will limit the scale of cuts made to areas like education and health care. Most other areas will face deep cuts aimed at reducing staff levels and eliminating non-essential programming.

The Liberals see their basic mission as preserving a core of important social services in the face of a structural (large and perpetual) budget deficit. This frames the debate differently than the more conservative position which simply dismisses the need for social spending.

As McGuinty holds a minority of seats in the legislature, he will need to convince others to join in his self-declared fight for fiscal sustainability. Some have suggested that framing the debate in the above way may surprisingly open the door for cooperation with the New Democratic Party (NDP) under leader Andrea Horwath.

Horwath will likely be pleased to see concessions on corporate taxes and may be able to force further concessions that delay or force consultation on issues of program transformation. She may be pressured by centrist sections of the labour movement to accept a year of more modest austerity in return for not facing a snap election that may see the Progressive Conservatives win power and impose much harsher terms on the public service.

The keyword of "transformation" needs to be subjected to criticism. It is preferred by the government to harsher terms like "cuts" or "privatization" because of public reaction to such terms, but also because it speaks to a different type of agenda. The aim of "transformation" is not simply to reduce staff and spending levels in the public service, but to shape the delivery of programs in such a way that they become more business-like and function within internal markets. This is part of the broad shift during the neoliberal period towards consumer-oriented practices.

An example of likely program transformation is the continued move away from funding health care based on needs towards a model that focuses on internal markets for care. This means that the government wants doctors and nurses to think more like business managers than simply care providers. For example, hospitals traditionally received a share of funding based on providing a wide range of services to the public, but the government has been moving towards a full fee-for-service model for hospitals that ostensibly encourages them to compete for limited health dollars and to arrange their practices in ways that maximize revenue.

For an economist like Don Drummond, creating internal markets for health care is often seen as an obvious route to cost control and quality improvement because it promotes virtuous market-oriented behaviour by health care professionals. In practice, there are many obvious dangers associated with creating an internal market for health services. For example, one of the first routes for cost savings within a model that prioritizes market-oriented behaviour tends to be the destruction of "good jobs" that underpin the operation of health centres. Precisely like the situation of outside workers in Toronto, the province and health boards will continue to try to break unions related to support services by encouraging contracting out.

Another step in the creation of an internal health market is the creation of viable independent hospitals, through consolidation and associated closures. This move will make it possible for the government to expand public-private partnerships in health care, as companies will be able to take risk for viable independent health centres that compete for public dollars. This may also be a way for Ontario to avoid large capital costs associated with building large new hospitals, in exchange for subsidizing the profits of involved companies over time.

It is unlikely that public-private partnerships would stop at the point of independent hospitals. Once there is a strong fee system in place that reflects costs, the foundation would be in place to allow private insurance, or at least copayments. There may be large pressures from the new private health sector to allow competition over provision in new areas. This is all just to give a sense of what is at stake in "program transformation" - it may simply be the first steps of deep privatization.

There are two registers on which the austerity agenda can be rejected.

The first way to reject Ontario budget cuts is simply to point out that this is a manufactured crisis. Most of the problem comes from a combination of historical tax cuts and the fallout of the global recession. For example, Policy Alternatives has suggested that over $10 billion in revenue might have been lost to tax cuts since the mid-1990s. This seems significant given that the current deficit is in the range of $15 billion. Likewise, hospital support workers had almost nothing to do with the creation of the global recession, while Canada's integration into global systems of finance and resource chains certainly did have a large role.

A related issue in this first approach is that spending in Ontario is already too low in critical areas. For example, with Ontario Works payments for singles at around $600 a month, there is obviously a need to raise the rates. Long waiting lists for housing and child care services speak to another area for further spending. All this will require revenue increases, despite the fact that taxes are actually much lower than in 1995.

The second register of resistance is more consistently anticapitalist. As one participant in the Ontario budget debate suggested, the priorities of society should determine the budget, the budget should not determine the priorities of society. Another way to say this is that we should orient towards need and use rather than profit and power. Even if a massive fightback were able to defeat the government's austerity agenda, the basic structures of society in Toronto are deeply unjust - with (racialized) poverty, deep corporate control, ecological unsustainability, precarious employment and many other issues that will only be met with a more thorough "transformation" of society.