Decoding KPMG’s Manitoba Fiscal Performance Review: Privatization

In a previous post we provided an overview of KPMG’s Manitoba Fiscal Performance Review (MFPR).  Here we focus on a theme that runs throughout the report –  privatization.

Department Input? 

But before we do that, we want to provide a bit of context to how the KPMG report was shaped.  KPMG was selected through a competitive bidding process and was awarded $740,000 for its work.  Its central task was to conduct a review and identify “potential areas of opportunity for efficiency and cost savings across core government departments (except Health, which will come as a separate report).

The KPMG report emphasizes the review and recommended actions were developed in  collaboration with government departments – namely the “Manitoba Team.”  While this would indicates broad involvement of government workers, this is not the case.  The report notes that it conducted 35 interviews, involving over 140 senior government officials, including central agency staff (Executive Council, Treasury Board Secretariat, and Priorities and Planning Secretariat), all Deputy Ministers of the 11 departments and departments’ Executive Financial Officers and Executive Management Teams.

While we don’t have specific information about who was interviewed, we do know that those involved will have been either politically appointed staffers and/or managers who are wise to know who butters their bread. And since a major objective is to control the growth of department expenditure (including “flattening of management”), those involved will have been keen to demonstrate they are onside with the Government’s mission.

Front line workers were NOT among those called upon for input. So make no mistake, the KPMG report is an ideologically driven document designed to justify the Pallister government’s austerity mission, including the elimination of at least 1200 positions..

And a big part of that plan is privatization.

Asset Management

One way that KPMG paves the way for privatization is through its prescriptions for Asset Management. The report identifies “Asset Management Planning and Rationalization” as one of its 12 “Areas of Opportunity.”   Phase 1 of the Report notes the “potential reduction in type/number of assets under Provincial Ownership.”  Not much more is said than this in Phase 1, however further reference to the selling-off of government assets can be found in MFPR Phase 2 report “Business Case-Social Housing” . We’ll have more on the implications of the KPMG report for social housing on a future post but suffice it to say that what we need is MORE not LESS social housing and KPMG report recommends the Government “transfer significant housing stock to private and community based providers where there will be no guarantee that it will remain affordable for low-income families.

Privatization ‘code’

Also look for language that is ‘code’ for privatization.  Sprinkled throughout the report you’ll find  strong hints of privatization. From more obvious statements like “transfer to the private sector” and “outsourcing of service delivery to the private sector”, to more subtle ideas such as “partnership opportunities” to reduce costs; “alternative” service delivery; and the less known private sector “solutions” such as “innovative approaches to funding” such as  “Social Impact Bonds” in  education, social service and justice  sectors.

Future State Opportunities?

If you are not up for reading the 270 page Phase 1 Report and the hundreds of pages in the 8 supplementary reports, you may want to check out the section titled “Future State Opportunities” (p. 100).  Here you will find the “Fiscal Performance Review Framework” that KPMG recommend for use across Government. They propose use of this framework to effectively change the “way all spending is looked at”.

You’ll also find a number of recommended practices that government departments are already doing, as well as an overview of “areas of opportunity” that may give you hints of what is to come (p 139) and how privatization may seep into service delivery.

But you’ll also find this useful tidbit that may come in handy when assessing the real “value” of the Pallister government’s policies and practices going forward. On page 113 of the report KPMG describes ‘value’ as including, “Financial, Social and Perceived” value.  We interpret KPMG’s definitions of ‘vale’ as the “math” the “heart” and the “spin”.

  • The Math
    • “Financial and economic value : the quantitative and tangible financial and economic value that is created as a direct result of programs/services based on revenue brought in, expenditures managed, or a return on an investment.”
  • The Heart
    • “Social value: the long-term value created by displacing costs that would normally be borne if social issues are not addressed, e.g the social costs of poverty, etc.”
  • The Spin
    • “Perceived value: the worth of programs/services in the minds of Manitobans, which is as important as the other dimensions of value. Since the recipients of programs/services are not generally aware of the cost, value to them may have more to do with how they perceive the results of the programs/services relative to others.”

The  KPMG report is clearly focused on the math – and in the short term. Selling assets and offloading services may help the Pallister balance the books in the short-term, but what about the long term implications of passing the keys and control to those motivated by profit?

We know that the Pallister government will also be focused on the ‘spin’.  It will need to find a way to convince Manitobans that massive spending cuts and privatization gives Manitobans the “most improved province” they were promised.

But what about the “heart” and how does this relates with the long term “math”? In further posts we’ll look at the social implications of the Governments obsession with cutting costs and raising revenue by selling  assets, privatizing services, and cuts to spending in areas, like education, that bring value to Manitoba.