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Supercorp will backfire on McGuinty

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Last March in the Throne Speech, the McGuinty government said it was considering the sale of some or all of Ontario’s Crown corporations, including the LCBO and Ontario Lottery and Gaming. Since then, OPSEU has been working closely with the Society of Energy Professionals, which represents about 8,000 workers in Ontario’s electricity sector. I am pleased to welcome brother Rod Sheppard, president of the Society, as my co-author on today’s message. — Smokey

2009soccouncil_web.jpgDear sisters and brothers,

On June 4, a writer for the Globe and Mail shone some light on Dalton McGuinty’s privatization plans. Apparently the Liberals want to put Ontario’s four biggest Crown corporations into a shell company. Then they will sell a 20 per cent stake in the new “Supercorp” to private investors.

Other than that, we have no details. All we know for sure is that the Premier is getting advice from Goldman Sachs, a company that “rarely lets the interests of its customers get in the way of making a dollar for itself,” as another Globe journalist wrote.

Most Ontarians can’t see why we want Goldman’s advice on anything.

That aside, though, Supercorp is a bad idea no matter who came up with it.

Together, the LCBO, Ontario Lottery and Gaming, Ontario Power Generation, and Hydro One earn over $4 billion a year in pure profit for the people of Ontario. Selling off all or part of these assets would be short-term gain for long-term pain. The government would get a one-time cash injection but lose the revenue stream from those assets. For good.

That money pays for schools, hospitals, roads, children’s aid, environmental protection – the whole gamut of public services. You can count on it: Losing that revenue will mean cuts to public services.

No doubt Mr. McGuinty cares deeply about Ontario’s economy. But he cares even more about the October 2011 provincial election.

As things stand now, that election will be decided by centre-right swing voters. In the last two elections, they voted Liberal.

They may not do so again. Right-leaning Liberals worry more about taxes and deficits than other Liberals do. A year from now, McGuinty fears, they may not be in the mood for a deficit that remains in the double-digit billions.

Clearly, Mr. McGuinty needs a plan for right-leaning voters. So he’s taking one right out of the Mike Harris playbook.

In 1999, four years of tax cuts had drained public coffers, putting at risk the Harris Tories’ reputation as fiscal managers. Harris responded by giving investors a 99-year lease on Highway 407. That deal was a rip-off for taxpayers (who built the highway), but the billions it earned helped hide the deficit. Blue Liberals were content, and voted Tory.

It’s ironic that the same McGuinty Liberals who railed against that deal should try “pulling a 407” today.

Most Ontarians see the case for assets sales as weak at best.

During the recession, when tax revenues plunged, our Crown corporations kept chugging along, earning money. Their earnings helped keep the government afloat. It just makes sense to have revenue streams other than taxes.

It’s no wonder the public is not calling for asset sales. Oddly enough, neither is Bay Street, at least not publicly. But McGuinty is.

For McGuinty, the appeal of Supercorp, with its partial privatization, is that it sounds less like privatization.

That’s why he polled Ontarians about selling off 20 per cent of these assets. He thinks it’s more palatable, somehow.

It isn’t. Twenty per cent of a bad idea is… a bad idea.

In any case, history shows that a government that tastes free money soon wants more. If we sell part of our Crown corporations now, it’s just a matter of time before this government, or the next, sells them all. That’s what happened to Petro-Canada. The Mulroney Conservatives started selling it in 1991. By 2004, the Martin Liberals had sold it all.

People won’t be distracted from the bad economics of asset sales by talk of all the good things McGuinty could buy with the money. When the real cost of privatization is placed in front of Ontarians, they will reject it no matter how the Premier spins it.

Politically, Supercorp is not so much a bold stroke as a desperate lurch. Coupled with the loss of revenue, there’s another problem: loss of control. How can McGuinty keep a lid on electricity prices when private investors demand higher profits? What if investors press for even more aggressive marketing of drinking and gambling, to the detriment of our health and our kids?

We predict that privatization, if attempted, will fail to impress Blue Liberals on all fronts. But on the other end of the Liberal universe, privatization will be a very big deal. If asset sales are put on the table, a significant bloc will bolt to the New Democrats in protest.

If Supercorp happens, it will backfire on McGuinty. And it could change the whole dynamic of the 2011 election.

In solidarity,

Warren (Smokey) Thomas
President, Ontario Public Service Employees Union

Rod Sheppard
President, Society of Energy Professionals

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