The last two weeks have seen a flurry of long- awaited policy releases from the National Party. If there’s a common denominator then it’s increased privatisation of public services and infrastructure in one form or another.
In education National has shied away from its more controversial policies like compulsory bulk funding of teachers’ salaries and the formation of so-called “trust schools”, but there is plenty to be concerned about.
National’s first initiative is a proposed increase in funding for private schools. This should not be a surprise because during the 1990s National increased funding for private schools while public schools were kept on starvation subsidies. Government funding for Rangi Ruru Girls’ School, for example, increased by 219 per cent ($455,374 to $1,453,645) from 1994 to 1999 while operational funding for public schools was kept below the rate of inflation through most of this time.
Just why the best resourced schools supposedly have greater needs than everyone else is never explained.
National’s second proposal is a privatising policy whereby the corporate sector would build and own new schools with the Government leasing them back and running them as public schools.
Most New Zealanders are now inherently suspicious of privatisation. Thank heaven we’ve learnt something from the economic disasters of Rogernomics. The problem is that National’s wealthy backers see these public disasters as successful. Many of them became enormously wealthy through privatisations and they are demanding more of the same.
National is presenting the policy to us based on the notion that it is cheaper for the private sector to build, own and maintain schools over the first 25 years of the school’s life. The Government doesn’t need to front up with the cash. Instead, it just pays a lease for the buildings and land over perhaps 20 to 25 years and then buys the school back.
But how could this arrangement possibly be cheaper in the long run? The Government itself can borrow money more cheaply than the private sector, and with private companies out to make healthy profits from such arrangements it’s clear the proposal is a rort. There is no educational benefit. It is a policy to deliver unearned income to the corporate sector.
Overseas experience confirms this unequivocally. In Canada, for example, these public-private partnerships are more costly and despite claims to the contrary the financial risks for the most part remain with the Government.
In Nova Scotia, the provincial government encouraged these lease-back arrangements and there was a flurry of 56 new schools built by the corporate sector. On the face of it the costs were lower and the government claimed it had less debt, but as the local auditor-general, Roy Salmon, said, “there is still a commitment to make lease payments for 20 years, and that is the next thing to a debt”.
He went on to criticise the government’s rush into these lease arrangements saying “accounting treatment should not drive decision-making”.
And this is at the heart of the problems. These deals are based on creative accounting where the calculated benefits all too often evaporate before the ink is dry on the contract. There are plenty of horror stories.
Evergreen Park lease-back school in New Brunswick was set up under this arrangement with the local authorities estimating it would cost $184,000 less than if the government funded and built it. In fact, it cost $900,000 more; $400,000 of this came from the extra cost of private finance (paid by the provincial government through the lease), while the government is also paying another $421,000 over the 25-year lease to lease back land they sold to the private sector corporation for just $274,000 in the first place.
Independent calculations were done to compare public and private costs of building Horton High School in Greenwich, King’s County. The private-sector deal cost $4.3 million more than it would have cost as a public venture. Similar calculations are common for these deals.
None of these arrangements are anywhere near the end of their leases yet but there is very real concern that corporations will let buildings deteriorate as the leases approach renewal, leaving enormous bills for the taxpayer.
New Zealand had real experience of this after our rail network was privatised. The original private buyer, Tranz Rail, sold out and left deferred track maintenance of around $270m which has to be paid by taxpayers. Meanwhile, the private operators leave with the loot.
In some cases, Canadian communities are facing stiff increases in after-hours rental of school facilities for sports practices and so on because the corporate owners want an extra pound of flesh. Serious concerns have been expressed about low- income communities now struggling to find the fees to keep their children in sport and out of trouble.
Decent education policy can only be driven by proposals to improve children’s learning. There is none of this in John Key’s announcements. It’s just more welfare for the wealthy.