path-breakers and pragmatists: manitoba and the new public management

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Path-breakers and Pragmatists: Manitoba and the New Public Management By Curtis Brown (7597386) March 20, 2008 Submitted to Prof. Karine Levasseur POLS 4570 Public Organization Management Department of Political Studies University of Manitoba

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Page 1: Path-Breakers and Pragmatists: Manitoba and the New Public Management

Path-breakers and Pragmatists:

Manitoba and the New Public

Management

By Curtis Brown (7597386)

March 20, 2008

Submitted to Prof. Karine Levasseur

POLS 4570 Public Organization Management

Department of Political Studies

University of Manitoba

Page 2: Path-Breakers and Pragmatists: Manitoba and the New Public Management

Introduction

The final three decades of the 20th century spawned profound changes in how citizens

and governments interact with one another. After the state entered more aspects of people’s

lives during the 1950s and ‘60s, a retrenchment started to take shape in the 1970s as

governments struggled to finance the complex welfare state that had been built up. This

breakdown of the dominant economic and political paradigm was accelerated by the

emergence of new ideas on how governments should provide services to citizens. The new

ideological paradigm of “neo-liberalism” that gained prominence during the 1970s and ‘80s

emphasized individual liberty and the free market while forcefully arguing that government

intervention in people’s lives was coercive (Bradford 2000, 203; Howlett et al. 1999, 27-28).

According to neo-liberals, government intervention in the economy – once seen as necessary

to limit individual inequality and economic boom-and-bust cycles – was the cause of the

period’s economic hardships. Public choice theory, one of the many strains of neo-liberal

thought, contended that “budget-maximizing” government officials will seek to expand their

operations to the point that public-sector growth will crowd out private-sector investment

(Borins 2002, 5). Thus, neo-liberals believed governments should only provide the most basic

public goods -- for example, military and police protection -- while allowing entrepreneurs,

rather than bureaucrats, to provide other services to the population (Howlett et al. 1999, 27).

Neo-liberals argued that any remaining services offered by government should be delivered

according to free-market principles – for example, government agencies competing with

entrepreneurs or operating according to private-sector management principles (Aucoin 2002,

38).

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Neo-liberal ideas crept into democratic dialogue in Canada and other English-speaking

countries during the 1970s, but scholars tend to identify their application with Margaret

Thatcher’s Conservative government of Great Britain (1979-1989) and David Lange’s Labour

government in New Zealand (1984-1989). The reforms undertaken by these two

administrations came to be described as “New Public Management,” or NPM (Aucoin 1995,

1). In Canada, New Public Management is most closely identified with Ontario and Alberta,

though some observers include Manitoba among the provinces that pursued these reforms

(Glor 2001, 128).

In 1977, two years before Thatcher came to power, citizens in Manitoba elected a

provincial government that was one of the first in the Western world to translate a neo-liberal,

reform-oriented philosophy into initial political success. The Progressive Conservatives under

Sterling Lyon championed government restraint, privatization and the idea of running

government like a business (Lee 1977a, 9). The Lyon government attempted to make these

changes after taking office; however, it found itself unable or unwilling to implement its

promised reforms in an ideological climate where people were not ready to abandon an active

role for government in the economy. Thus, it was left to another PC government under

Premier Gary Filmon to incrementally implement New Public Management (NPM) in

Manitoba.

This paper examines Manitoba’s experience with neo-liberalism and New Public

Management, following its evolution from the late 1970s to the end of the millennium. This

paper places Manitoba in a comparative context with initiatives undertaken by Alberta and

Ontario -- the two provincial governments most often identified with neo-liberalism and NPM

– to illustrate how Manitoba only bought partially into these policy paradigms. This paper

makes the case that the implementation of New Public Management reforms requires a

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broader commitment to neo-liberal principles such as deficit reduction and privatization that

must take place before bureaucratic restructuring. Manitoba embraced and quickly abandoned

the broad tenets of neo-liberalism earlier than most Canadian governments, which meant that

the province’s transition towards NPM experienced arrested development. This hesitation,

perhaps the result of attempting to implement it in a province with “moderate” political

traditions (Thomas and Wilkins 1997, 119), meant that a milder, less ideologically-driven

form of NPM was ultimately introduced in Manitoba. Manitoba’s version of “NPM-Lite” may

offer an alternative path to public sector reform in other jurisdictions.

What is New Public Management?

It is difficult to separate what public administration scholars call New Public

Management (NPM) from the sociopolitical doctrine of neo-liberalism. The two concepts are

inextricably linked, as governments that followed the neo-liberal tenets of deficit reduction,

privatization and government downsizing also tended to pioneer NPM-style reforms to their

public sectors. While some governments, such as France, opted for a “neo-statist” or “strong

state” approach to public sector reform (Clark 2002, 778), NPM has been associated with a

neo-liberal “weak state” philosophy in most English-speaking countries with Westminster-

style governments, including Canada. This ideological framework found currency as the

welfare state came under attack in the 1970s. As Christopher Pollitt (1990, 44) writes, neo-

liberalism “could only lead its believers towards policies for cutting the size of the public

sector and increasing the efficiency of what was left.” The Lyon government was no

exception to this, offering voters what Savoie would later describe as the “Big Answer” to

“real and imagined shortcomings in the public bureaucracy” (Savoie 1995, 113). Despite the

Lyon government’s rhetorical assertion that government should run more efficiently and

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effectively, it failed to fully act upon the ideas later implemented in Great Britain and New

Zealand as part of NPM’s “first wave of radical government reform” (Pal 2006, 202).

Peter Aucoin (1995, 38-39) argues New Public Management contains the following

elements:

Decentralization of government departments and decision-making autonomy for subordinate civil servants

Targets for service delivery, or “outputs,” that are established by contract, with rigorous performance management and reporting regimes in place to hold public servants accountable for meeting personal or organizational goals

Separation of service delivery from policy-making within departments Open competition for public service executives Competition between public- and private-sector agencies for the right to deliver public

services, with a preference for privatizing government operations and/or contracting out services to private-sector organizations.

Using these criteria, we shall see that neither the Lyon nor the Filmon governments

measured up on all counts. While Lyon’s rhetoric pointed to changing the way governments

did business, he didn’t reform government operations to the same extent as Great Britain or

other provinces later did. The Filmon government, on the other hand, devolved decision-

making authority while demanding greater accountability of government agencies, but did not

pursue privatization to the same degree as other jurisdictions. The next section tracks the

evolution of these reforms in greater detail.

The Lyon Roars

Sterling Lyon came to power in 1977 after waging a heated campaign against the

province’s first New Democratic government. While Ed Schreyer’s NDP practiced “a mild

form of social democracy” (Netherton 2001, 218), Lyon’s Progressive Conservatives accused

the NDP of mismanaging the provincial economy and bringing government into every corner

of Manitobans’ lives. “I want to suggest to you and other Manitobans that one of the basic

issues in this provincial campaign is freedom,” Lyon told Progressive Conservative Party

supporters shortly after the campaign began (Fitzgerald 1977a, 8). This theme was at the heart

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of the speeches Lyon delivered throughout the province in the fall of 1977, as he repeatedly

attacked the NDP for the growth in government spending, the expansion of the bureaucracy,

management of publicly-owned Crown corporations and their policy of leasing government-

owned farmland to producers.

In its campaign platform The Challenges Ahead for Manitoba, the PCs pledged to

implement “acute protracted restraint” in order to make government affordable to taxpayers:

We shall have to recognize and accept limits, primarily on what government can achieve in the economy, limits on what citizens may expect of the government, limits in the sense that choices will have to be made (Lee 1977a, 9).

While there were few specifics contained in the party’s election document, it did offer

variations on some of the solutions that later came to be associated with New Public

Management. First, Lyon called for a “considerable” reduction in the provincial civil service,

which at the time included about 14,000 employees (Winnipeg Free Press 1977, 1). The

Progressive Conservatives planned to cut a wide range of taxes which would be financed by

“cutting fat” from the present government budget. There were plans to privatize government-

run businesses and create “partnerships” between the public and private sectors, though this

was not explained in great detail. The Manitoba Liberal Party also made similar promises

during the campaign to trim the public-sector payroll, cut the number of cabinet portfolios

from 29 to 12 and allow private businesses to compete with the Manitoba Liquor Control

Commission in the retail sale of alcohol (Kreuger 1977, 12). This emphasis on private-sector

solutions and bottom-line-driven government put an “acceptable face” on radical reform:

For that wider constituency, ‘better management’ sounds sober, neutral, as unopposable as virtue itself … Yet simultaneously, for new right believers, better management provides a label under which private-sector disciplines can be introduced to the public services, political control can be strengthened, budgets trimmed, professional autonomy reduced, public service unions weakened and a quasi-competitive framework erected to flush out the ‘natural’ inefficiencies of bureaucracy (Pollitt 1990, 49).

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As Netherton notes, Lyon’s neo-liberalism “marked the end of the period of consensus

on the essentials of state interventionism” in Manitoba (Netherton 2001, 220). On the night of

the election – which resulted in Lyon’s Progressive Conservatives capturing 49 per cent of the

popular vote and 33 of 57 seats in the Manitoba Legislature – Lyon vowed to return “sane,

common-sense government” to Manitoba (Lee 1977d, 1). After eight years of NDP rule, a

large number of Manitobans had voted for a new approach. But as the next four years would

reveal, Manitobans weren’t quite ready to embrace the changes Lyon had in store for them.

Premier Lyon and his new 15-member cabinet were officially sworn in on Oct. 23,

1977. In crafting his cabinet, Lyon displayed his taste for smaller, more-efficient government

by reducing the provincial cabinet from 17 to 15 members and giving three of his cabinet

ministers extra responsibilities (Fitzgerald 1977b, 1).1 However, Lyon did leave extra room at

his cabinet table for three “ministers without portfolio” who were given responsibilities other

than running government departments. One of these ministers, Sidney Spivak, would play a

prominent role in the Lyon government’s agenda for reforming government operations.

Blueprint For Change: The Report on Government Organization and the Economy

Spivak -- whom Lyon had pushed out as party leader two years earlier -- was asked to

lead a new task force of businesspeople, government officials and experts charged with

finding government efficiencies and boosting economic growth. Spivak’s work was

symptomatic of the time: in 1977, the federal Liberal government appointed Allan Lambert to

lead a royal commission examining the government’s financial management and

accountability. Meanwhile, a similar commission in Australia reported a year earlier on ways

that Commonwealth country could reform the operations of its public sector, though its thrust

1 Three Tory ministers – Harry Enns, David Banman and Bud Sherman – held portfolios that had been previously been divided up between nine NDP cabinet ministers.

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was to open up the public sector to new approaches rather than impose neo-liberal restraints

on its operations (Polidano 1995, 458).

The “Keynesian” economic consensus (named for British economist John Maynard

Keynes) that shaped post-war government thinking in Canada held that governments should

act as a counter-cyclical economic stimulus during periods of economic slowdown (Bradford

2000, 198). The Task Force on Government Organization and the Economy, however, saw

government as “the source of the problem” in terms of the province’s economic woes (Spivak

1978, 23). As well as identifying instances of “duplication, waste and other inefficiencies,”

the task force was asked to recommend ways government could carry out ongoing program

evaluation and examine “the cost effectiveness of administrative policies and procedures”

(Spivak 1978, 4). One of its recommendations was to create a Treasury Committee, a board of

six cabinet ministers with the premier serving as chairman, which would meet each day to

discuss government operations. It was argued that this committee would allow the broader

cabinet to deal with policy issues while this specific group concentrated on day-to-day matters

(Spivak 1978, 61-62). This separation of policy-making from administration meets one

criterion of Aucoin’s concept of New Public Management, though an obvious overlap would

continue to exist as this system would have given certain cabinet ministers both policy and

administrative responsibilities. The committee was to meet periodically to review short- and

long-term budget forecasts, capital investment plans and staffing levels in both departments

and Crown corporations (Spivak 1978, 62). While this was supposed to give government

greater control over expenditures, it actually went against the key features of NPM in that it

centralized control and did not empower individual departments to be responsible for their

own operations.

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By and large, the commission’s findings stressed the need to put a central agency in

charge of saving money rather than offering new ideas on how to efficiently manage

government departments. This was evident in its focus on the bleak economic situation facing

Manitoba: government spending had more than tripled and the public sector’s ranks increased

by 43 per cent during the NDP’s eight years in office (Spivak 1978, 16). The province was on

track to post a $129-million deficit for 1977-78, a fivefold increase over the projection made

earlier that year (Spivak 1978, 19). While this was mainly due to the substantial tax cuts

delivered when the Progressive Conservatives took power, the province’s debt had ballooned

from $774 million in 1966 to $3.5 billion a decade on. Even with Lyon’s “acute protracted

restraint” and centralized control of budgeting, the task force concluded that debt and deficits

would be the order of the day for the foreseeable future (Spivak 1978, 19). Sure enough, they

were right, as the Lyon government posted deficits for each of its four years in office, thus

raising the province’s general purpose debt higher.

Attack on the Crowns

Progressive Conservative attacks on the previous NDP government focused on two of

its initiatives in particular: Manitoba Hydro’s construction of hydroelectric dams, and public

auto insurance. During the 1977 campaign, Lyon assailed dam construction as particularly

exorbitant, citing the $300-million Jenpeg dam on the Nelson River as “… one of the greatest

pieces of political incompetence and wastage of taxpayers’ dollars that has ever taken place in

the history of Canada (Lee 1977c, 8). Lyon appointed Justice George E. Tritschler to examine

Hydro’s operations. The Tritschler Report, released in 1979, did not lead to a significant

change in the way Hydro operated, nor did it reach any conclusions about privatizing part or

all of the Crown utility. A separate commission tasked with studying auto insurance, on the

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other hand, did make important recommendations that fit with the neo-liberal, New Public

Management-oriented ethos. The following section examines that report in more detail.

The Burns Report (Report of the Ministerial Insurance Review Committee)

In July 1979, the Lyon government appointed a three-member committee chaired by

Michael Burns to review how auto insurance was provided to Manitoba motorists. In 1971,

Ed Schreyer’s NDP administration passed legislation making public automobile insurance

mandatory and created a new Crown corporation, the Manitoba Public Insurance Corporation

(MPIC), to deliver this service to Manitobans (Schulz 2005, 60). The then-opposition

Progressive Conservatives voted against this measure, and during the 1977 campaign they

promised to let private insurers compete with MPIC -- though Lyon himself doubted

insurance companies would return to Manitoba as long as MPIC remained in the marketplace

(Lee 1977b, 10).

The Burns Commission was given the following mandate:

1. To review the operations of, and services provided by, the Manitoba Public Insurance Corporation

2. To examine the principle of no-fault automobile insurance and its possible extension to include injury and property damage

3. To review compulsory automobile collision coverage4. To study the “respective roles of the private and public sectors in providing

insurance coverage” (Burns et al. 1979, 1).

While the terms of reference were neutral in tone, the composition of the three-

member commission suggested its findings would be biased towards neo-liberal conclusions.

Commissioners James F. Cox (an insurance agent) and David W. Stone (a chartered

accountant) represented business interests, while the chairman, Michael Burns, was a former

IBM executive who had been serving as the executive-in-residence with the Vancouver-based

Fraser Institute, a newly-founded neo-liberal think-tank (Burns et al. 1979, 2-3). Sure enough,

the commission’s findings and recommendations were couched in the same language of

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efficiency that later came to be a hallmark of New Public Management rhetoric. According to

the commissioners, the Crown corporation had been “plagued by political interference”

during the Schreyer era, with the government interfering by arbitrarily setting insurance rates,

hiring people based on political whims and subsidizing its operations (Burns et al. 1979, 7-8).

The commissioners believed MPIC had to be “set as far apart from Government as was

possible” by turning it into a private, policyholder-owned mutual insurance corporation

(Burns et al. 1979, 9). Under this arrangement, MPIC would not only stand alone from

government, but it would also compete with other insurance providers in the open market.

Monopolies, the commissioners argued, lacked the “sharp cutting edge” to provide superior

service to their clients. “Without the nagging spur of competition or opposition, the incentive

to improve wanes and the pursuit of excellence slows,” they said (Burns et al. 1979, 10).

The commissioners also contended that MPIC’s monopoly had robbed Manitobans of

their “freedom of choice” when it came to insurance. “There has been no argument presented

that justifies a government compelling persons to insure their own property,” the

commissioners noted (Burns et al. 1979, 14) as they recommended that Manitoba drivers be

given the option of purchasing automobile insurance. As well, the commissioners

recommended that drivers should have the right to pursue greater damages in court if they

sustained a bodily injury, something that fit their biases towards individual agency and

freedom of choice.

The commission accused MPIC’s management of failing to plan and improve the

company’s operations. Furthermore, they argued the company’s union structure created

inefficiencies, noting that “a bureaucratic attitude had taken hold in the organization” (Burns

et al. 1979, 11). The commissioners believed with a “major revamp” of its board of directors,

management structure and operating practices, the company could compete as a private

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company in a competitive marketplace (Burns et al. 1979, 16). The government would remain

responsible for regulating the insurance industry – as well as for driver licensing, road safety,

etc. – through the creation of a Motor Vehicle Authority (Burns et al. 1979, 15). Fitting the

NPM logic, however, this new authority would not be a line department of government but

would instead have “semi-autonomous status with strong public representation” (Burns et al.

1979, 15). What this meant was not exactly clear, but it was quite obvious that the Burns

Commission’s preference was to retrench rather than expand government bureaucracy.

The commissioners tabled their report in late 1979, only for it to be rejected. Lyon

appeared on television to announce that “the eggs cannot be unscrambled” and Manitoba

drivers would not buy their auto insurance on the open market (Schulz 2005, 503). Whether

this change of heart was inspired by Lyon’s earlier feeling that private insurance companies

would not re-enter the Manitoba market or simply because of MPIC’s overall popularity with

Manitoba drivers is not exactly clear. However, public auto insurance would remain in

Manitoba and the Lyon government’s major opportunity to impose New Public Management-

style reforms on an area of its operations had passed it by. With the economy worsening and a

re-election campaign on the horizon, further reforms would have to wait.

Transformation Stalled

As Netherton notes, one of the Lyon government’s chief weaknesses was its

management of the economy. “The basic problem facing the government was that once the

public spigot had been turned off, private investment did not jump in to take its place”

(Netherton 2001, 220). So, the government followed the path trodden by previous

governments and invested public dollars in “mega-projects” such as an aluminum smelter, a

potash mine and – ironically – Manitoba Hydro’s Limestone generating station (Netherton

2001, 221). As a result, the Lyon government was unable to balance its books, with the deficit

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growing from $37.9 million in 1979-80 to $82.7 million in 1980-81. On Nov. 17, 1981,

Manitoba voters put an end to the Lyon government’s short-lived neo-liberal experiment as

the NDP under new leader Howard Pawley won 34 of 57 seats in the Manitoba Legislature

and the Progressive Conservatives retained just 23 seats. Manitobans had rejected the

premises of neo-liberalism, but these ideas did not die – rather, they hibernated until another

Progressive Conservative administration was in a position to put them into practice.

The NDP interregnum

After taking office in late 1981, the new NDP administration returned Manitoba to the

old Keynesian style of interventionist government to which the province’s citizens had grown

accustomed (Netherton 2001, 225). However, the economic climate of the early 1980s was

not favourable to a government committed to counter-cyclical budgeting during difficult

economic times. The provincial deficit ballooned during the Pawley years, growing from $55

million in 1982-83 to a high of $321 million in 1984-85. Though some budgetary restraint

measures were introduced following the 1986 election, which returned a NDP minority

government, the budget deficit still hovered at $256 million in 1987-88, the Pawley

government’s final year in office.

The Pawley government’s legislative agenda was also gridlocked during this period,

preventing much in the way of government reforms. The Legislature was paralyzed for nearly

a year after the opposition Tories refused to debate government legislation making Manitoba a

bilingual province (Doern 1985, 182-183). As well, the NDP’s managerial skills were under

attack after it came to light that MTS, the publicly-owned telephone company, had lost $27

million on a bad investment in Saudi Arabia (Pawley 1996, 303). The ideological climate had

also shifted, as neo-liberalism caught on elsewhere. By the mid-1980s, the Pawley

government was the last NDP administration left in Canada, watching as neighbouring

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Saskatchewan began privatizing Crown corporations and transforming its public service along

NPM lines (Michelmann and Steeves 1985, 10-14). The 1986 election preserved the NDP’s

majority in the Legislature by a thread, with the party holding 30 seats. Two years later, a

disgruntled NDP backbencher, Jim Walding, voted against the government’s 1988 budget,

triggering the election that brought the PCs back to power under new leader Gary Filmon.

Moderate Evolution: The Filmon Years

While Filmon and the PCs came to power at a time when neo-liberal parties preaching

new approaches to government management were in vogue, the new premier and his

government did not follow their predecessors’ approach of trying to impose radical change

overnight. This was due to the fact that Filmon’s hold on power was tenuous: the PCs had just

25 seats in the 57-seat Legislature, forcing it to rely on other parties to pass legislation. The

political landscape had been altered, with the resurgent Liberal Party now the official

opposition and the NDP reduced to third-party status with 12 seats. Thus, the shift to NPM

began with “pragmatic incrementalism” (Netherton 2001, 226). The minority government

period was also dominated by the debate over the Canadian Constitution and the Meech Lake

Accord – which died in the Manitoba Legislature in 1990 -- rather than matters concerning

government management (Dyck 2006, 80). Filmon’s popularity increased after the failure of

Meech Lake, and in 1990 his party managed to form a majority government with 30 seats.

The Filmon Tories started their 11-year run in power by keeping in place the

expenditure control measures implemented by the Pawley government, and took some small

steps to centralize control of the health and education systems, including a standardization of

the school curriculum (Netherton 2001, 226). The government’s first major step toward NPM

policies was its failed attempt to privatize home-care services for senior citizens. The Filmon

government proposed contracting out this service, which had been established by the Schreyer

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government in the early 1970s, but significant public opposition to the move led them to

shelve the plan (Netherton 2001, 226-227).

The recession of the early 1990s and new limits on federal transfer payments forced

the Progressive Conservatives to begin imposing restraint (Dyck 2006, 80). No longer

constrained by the need to rely on the opposition Liberals and NDP for support, the PCs set

out to eliminate the annual deficit within five years while searching for new solutions to allow

government to live within its means. Starting with the 1991 budget, it froze the wages of

48,000 public sector workers and cut 1,000 jobs from the civil service (Dyck 2006, 80). After

cutting 300 more civil service jobs in 1992, it imposed further restraint on civil servants in

1993 and 1994 by forcing them to take 10, then 20 unpaid vacation days – so-called “Filmon

Fridays” – each year (Dyck 2006, 80-81).

At the same time, the government began to experiment with the methods it used to

deliver services. In 1992, it created its first Special Operating Agency (SOA), the Manitoba

Fleet Vehicles Agency (MFVA). The agency, responsible for owning and maintaining the

government’s inventory of nearly 3,000 cars, trucks and vans, was set up as an arm’s-length

agency separate from any government department. The agency was run by a director, who

answered to an advisory board made up of senior civil servants and two private

businesspeople. As Thomas and Wilkins (1997, 112) note, this agency and the others that

followed it “… meld[ed] the benefits of public policy direction under a line department with

the benefits of operating in a more businesslike way.” The MFVA was governed by an

operating charter, a public document that outlined the terms and conditions under which it

would be run. It was expected to develop multi-year strategic plans with annual budget targets

and financial projections subject to Treasury Board approval (Thomas and Wilkins 1997,

113). Its goals included a pledge to “increase the latitude for innovation” in service delivery

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and ensure “clearly-defined accountability for results” (Manitoba Fleet Vehicles Agency

1992, 9). Its annual report would be tabled in the Legislature, and the agency would be subject

to an “effectiveness review” every three years to see if it was meeting anticipated results

(Thomas and Wilkins 1997, 113).

Almost immediately, the new agency delivered positive results. In its first year, the

agency posted a $4.1 million profit. It eliminated 287 underused vehicles from commission in

its first year and eventually cut the size of the provincial fleet from 2,746 vehicles in 1991 to

2,212 in 1996 (MFVA 1995: 36). This reduction in fleet size allowed the government to save

$3 million annually (Thomas and Wilkins 1997, 114). The MFVA’s internal audit group

conducted its three-year review in 1995 and found “many positive changes and

accomplishments” that had created “a more business-like operation focused on client service”

(MFVA 1995: 9). In fact, the SOA experiment would be replicated several times during the

Filmon years, with 15 new agencies in place by 1997 (Thomas and Wilkins 1997, 114). While

these agencies were scattered throughout government, their presence allowed the government

to save money and deliver services in a business-like manner where appropriate to do so. In

that sense, they were manifestations of New Public Management, modeled somewhat on

Britain’s Next Steps2 agencies (Borins 2002, 9). However, the Filmon government did not

take the next step – market-testing these agencies and government departments against the

ability of the private sector to deliver the same services – thus making SOAs an example of

internal administrative transformation rather than reform stimulated by outside forces.

According to Thomas and Wilkins (1997, 119), this was to be expected in a province with

“moderate traditions” and a civil service “… largely in catch-up mode with respect to internal

2 In 1988, the British government began creating “Next Steps” agencies that were given greater decision-making autonomy while requiring adherence to specific aims and objectives set out in an annual framework document. These agencies, which were run by a chief executive hired from an open competition, numbered 138 by 1997 (Borins 2002, 9).

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reform.” During Filmon’s first term, change came incrementally. It would take the next four

years to bring about a more-radical transformation of Manitoba’s bureaucratic institutions.

Post-1995: The Evolution Gains Speed

On the eve of the 1995 election, the Progressive Conservative government announced

that it had reached its goal of a balanced budget one year ahead of schedule. Thanks to

restraint measures, savings on program costs and increased gaming revenues, the provincial

government projected a $48 million surplus for 1995-96 (Information Services 1995, 1). On

the same day it announced its first surplus in 22 years, the provincial government also

introduced legislation requiring future governments to balance the annual operating budget

and re-pay a minimum amount of debt each year. The Balanced Budget, Debt Repayment and

Fiscal Accountability Act, modeled on legislation enacted in several American states, was far

more restrictive than other fiscal control measures introduced in other Canadian provinces

during this period (Kennedy and Robbins 2001, 13). Not only did it force the government to

retire at least $75 million of its general purpose debt each year, but it forced cabinet ministers

to take a 20 per cent pay cut if they overspent their budget and a 40 per cent reduction if they

ran a deficit for two or more years. It also required the government to hold a referendum on

any future tax increase, thus limiting any future governments’ ability to raise funds. This law,

a prominent feature of the 1995 PC re-election campaign, led to a sea change in Manitoba

fiscal policy. After running deficits for more than two decades, surpluses became the norm in

the late 1990s and early in this century.

Filmon and the PCs increased their majority during the 1995 campaign, gaining two

extra seats as Liberal support sagged. That same year, Ontario’s Progressive Conservative

Party returned to power after promising to reform government and cut spending. A parallel

reform effort was already underway in Alberta (Peter J. Smith 2001, 297) and the federal

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government had just started its push towards deficit elimination. As Dyck (2006, 58) notes,

governments across Canada “were all constrained to the orthodox view that they should not

only balance their budgets, but also reduce their taxes, usually in that sequence.” Doing so

would be difficult after the 1995 federal budget slashed transfer payments to the provinces,

but Filmon and the PC government now had the political capital to step up their neo-liberal,

New Public Management mini-revolution.

As noted earlier, privatization of government agencies is one of the central features of

New Public Management (Aucoin 2002, 39). The Filmon government preferred to establish

SOAs during its first full term rather than privatize government assets – home-care services

being the notable exception -- but that changed soon after the 1995 election. In 1996, the

government announced plans to sell the publicly-owned Manitoba Telephone System (MTS)

after promising not to do so during the campaign. Filmon argued that the Crown corporation

did not have the financial capacity to adapt from a public telephone monopoly to a

telecommunications services firm that could compete in a fast-changing, technology-

dependent and very competitive market (Netherton 2001, 227). The sale of MTS brought the

publicly-traded firm needed investment capital and allowed the government to put $500

million from the sale into the newly-created Fiscal Stabilization Fund while at the same time

shedding the Crown corporation’s debt. However, the sale was assailed on several fronts.

Critics argued that its share price was undervalued, that friends of the government made the

most money off its sale3 and that the PCs acted undemocratically to using closure -- cutting

off debate in the Legislature -- to pass the legislation approving the transfer (Doug Smith

2003, 1).

3 Among those eventually appointed to the MTS board were Tom Stefanson, brother to Tory finance minister Eric Stefanson; Ashleigh Everett, wife of future Tory leader Stuart Murray and eventually, former premier Gary Filmon.

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The sale of MTS provides an interesting case study in NPM principles. After MTS

was sold, New Democrats argued -- and continued to argue long after the Tories lost the 1999

election -- that the sale of Manitoba Hydro was next on their agenda (Welch 2007, 5). Yet the

Filmon Tories made no such move to sell the publicly-owned power company or other Crown

corporations. Instead, Hydro became a greater monopoly in the provincial energy sector after

it purchased the assets of Centra Gas, the province’s largest natural gas supplier, in 1999. This

move suggested that “there were significant political and economic limits to the Filmon

government’s “neo-conservatism”4 (Netherton 2001, 228) that once again reveals a pragmatic

rather than an ideological approach to reform.

These limits did not prevent the Filmon government from pursuing other reforms,

however. Between 1990 and 1995, it examined and restructured the two most-expensive

features of the provincial welfare state – the education and health-care systems.

Education

The provincial PC government did not act immediately to reform the education

system. During the 1990-95 term, the PCs appointed a commission to examine the Public

Schools Act (the Panel on Education Legislation) and struck another to examine school

division boundaries (the Norrie Commission). Few of the recommendations made by these

commissions – for example, the Norrie Commission recommended reducing the number of

school divisions from 60 to 21 – were carried out (Levin and Young 1997, 24). Instead, the

changes to come were inspired by the 1994 release of New Directions, a Department of

Education document that called for standardized testing, changes in teacher training and the

creation of parental advisory councils for schools. It followed the lead of Alberta, New

Zealand and Britain by giving parents greater freedom to choose which schools their children

4 “Neoconservatism” and “neo-liberalism” are used interchangeably by some authors. When not citing from a direct source, this paper uses the term neo-liberalism to describe this particular political philosophy.

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could attend, though it did not replicate Alberta’s experiment with “charter” schools5 or

pursue Ontario’s policy of offering parents vouchers for private-school tuition (Levin and

Young 1997, 25).

Most of these changes were implemented after the 1995 election. Of them, the

introduction of standardized testing proved to be the most controversial. Students in Grades 3,

6, 9 and 12 wrote province-wide assessment tests in Math and Language Arts and the results

were published by the Department of Education. These tests were tied to the broader goal of

making the education system more accountable for the dollars put into it. In its 1996

discussion paper Enhancing Accountability, Ensuring Quality, the provincial education

department made the case for “formal performance measurement” of teachers in order to

“ensure the provision of quality educational services to students” (Manitoba Education and

Training 1996, 22). Some of these ideas included a merit-based system of remuneration and

tenure for teachers, based in part on evaluations by students and fellow educators similar to

“feedback models that are being introduced by a number of private employers” (Manitoba

Education and Training 1996, 23). Clearly, the Manitoba classroom was no longer immune to

private-sector management practices, even if the school system would not be forced to

compete in the marketplace.

As for universities and colleges, the government attempted to reform them as well, but

did so to a lesser extent. The University Education Reform Commission, headed by former

premier Duff Roblin, reported in December 1993 on the state of Manitoba’s universities and

colleges. The report’s authors concluded that universities would have to “so order their affairs

as to make the best use of present resources” in light of the fiscal situation in the early 1990s

(University Education Reform Commission 1993, 1). Yet as Dan Smith notes, the rate of 5 Public, non-profit, autonomous schools that offer unique learning opportunities and are operated by a special advisory council that enters into an agreement, or “charter,” drawn up between parents, educators and the Alberta government (Alberta Learning 2002: 1-3).

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administrative change at the University of Manitoba was relatively slow. For the most part, U

of M and other universities and colleges responded to government cutbacks by simply raising

student tuition fees rather than radically restructuring their operations. Smith notes that it is

more difficult for governments to enact reforms in semi-autonomous organizations like

universities due to the fact that government demands are just one of many pressures

autonomous institutions must contend with (Dan Smith 2004, 299). This “agency problem”

may have led to fewer reforms at the post-secondary level. Another factor that may have

played a role was the Filmon government’s 1996 decision to create the Council on Post-

Secondary Education (COPSE), an arm’s-length agency responsible for funding universities

and approving new programs.

Health

Since the introduction of Medicare in the 1960s, health-care costs had risen to the

point that they accounted for the highest share of the Manitoba government’s budget by the

1990s. In 1995, the province spent 33.8 per cent of its $4.8-billion budget on health care, with

the proportion of health-care costs rising as the decade went on (Manitoba Finance 1995, 1).

With the provincial government anxious to balance its budget, it was clear that it had to trim

spending on health care. The question was how to do this without triggering a backlash from

Manitobans who relied on the service.

In 1992, the provincial health department released its action plan for restructuring the

health system. Its goals included commitments to securing “the delivery of alternative and

less expensive services” and finding “mechanisms to assess and monitor the quality of care,

utilization and cost-effectiveness” (Manitoba Health 1992, 2). One of these was a

commitment to a “total quality management” system – a model of service delivery that

imitates industrial quality control processes by examining “underlying work processes”

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(Shortell et al., 1995, 378) – in order to continuously improve health service delivery

(Manitoba Health 1992, 36). Adopting the language of New Public Management, the report

frequently referred to patients as “customers” and “clients” whose needs and expectations

must be met. In the same vein, the report argued there must be “reasonable public

expectations” of the services the system could provide, arguing that Manitobans must take

responsibility for their health and lower their expectations on the system (Manitoba Health

1992, 2-3). The report stated: “More health spending does not equate with improved health or

more effective health services … or higher quality of care” (Manitoba Health 1992, 5).

The government moved first to decentralize services. It started with mental health

care, transferring patients from institutional settings to assisted-living facilities in the

community (Manitoba Health 1992, 35). As well, it emphasized the idea of care closer to

home by introducing a wide range of clinics and community health centres to keep people out

of hospitals, which were more expensive to operate (Manitoba Health 1992, 3). After the 1995

election the government introduced a new managerial tool to the system by creating regional

health authorities to oversee the delivery of health services in a given area. These authorities

largely replaced the multitude of autonomous hospital boards scattered throughout the

province, and were expected to save the system money by efficiently co-ordinating service

delivery. While a recent investigation of regionalization concluded that the system delivers

services more efficiently under the RHA model, it argued that the system is neither as

efficient nor as accountable for the dollars it spends as it could be (Gray, Delaquis and

Closson 2008, 13). Specifically, the report points out that the system lacks valid performance

indicators and has blurred the lines of accountability between the provincial health department

and the RHAs (Gray, Delaquis and Closson 2008, 14). However, the report’s authors note that

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these problems have also been experienced in other jurisdictions that have implemented

regionalization in their health-care systems.

In 1999, the provincial health department released a new action plan that further

expanded on the New Public Management notion of patients as customers. Stung by

criticisms about overcrowded hallways and substandard food in hospitals, the government

pledged to implement a “Patients’ Bill of Rights” that would guarantee in-patients a bed,

nutritious food, access to personal health information and quick treatment (Manitoba Health

1999, 10). An independent “patients’ advocate” and patient satisfaction surveys would ensure

compliance with these rights (Manitoba Health 1999, 11).

What is interesting to note is that the government’s attempts to revamp the system

were once again largely driven by internal reforms, not by efforts to introduce private-sector

competition to the health system. While some tertiary areas were contracted out to private

companies – for example, food services at Winnipeg hospitals (Howard and Willson 2000, 4)

– the level of actual privatization in the health-care system was relatively low compared to

other jurisdictions. While the Canada Health Act is intended to make the delivery of private,

for-profit health care illegal, it has not stopped some provinces from allowing private-sector

providers to deliver publicly-funded medical services (Deber 2002, 6). Furthermore, the

Manitoba government did not impose the same degree of spending restraint on its health

system as other provinces. Saskatchewan’s NDP government, for example, closed 52 rural

hospitals in 1993 as a cost-cutting measure. Manitoba, on the other hand, closed none, opting

instead to convert 200 acute-care rural hospital beds to other, less cost-intensive uses such as

long-term care (Manitoba Health 1992, 36).

Despite the Filmon government’s incrementalist approach to health-care reform, the

cutbacks had taken their toll. Internal government polling showed that Manitobans were not

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happy about health-care cutbacks and restructuring (Lyle 1999, 2). In response, the

government increased health-care spending in the 1999 budget and launched an advertising

campaign about its efforts to improve the system. After the election was called, Filmon

unveiled a pledge to cut $500 million in taxes while increasing spending on health care and

education by $500 million. After a decade of cutbacks, this “50-50” pledge contradicted

earlier calls for austerity, and was attacked by the NDP for being unrealistic. As Netherton

(2001, 230) notes, “a government that had been dishing out restraint for a decade by

embedding an orthodox zero-sum view of public finances … could not credibly state that it

could find one billion dollars to get re-elected.” Manitoba voters agreed, and on Sept. 21,

1999, Gary Filmon’s Progressive Conservatives were defeated by the NDP after an 11-year

run in office.

NPM Elsewhere: Alberta and Ontario

Alberta

Alberta, along with Ontario, is said to have embraced the gospel of New Public

Management more than any other Canadian province (Pal 2006, 81). However, the province

was a relatively-late convert to this administrative creed. Alberta’s current governing party,

the Progressive Conservatives, came to power in the early 1970s at a time when the

government had plenty of resource revenue from oil royalties to spend on state expansion.

Under Premier Peter Lougheed, the Progressive Conservative government “… demonstrated a

much greater willingness to use the power of the state to obtain its policy objectives” (Peter J.

Smith 2001, 286). As part of this province-building strategy, the Alberta government

quadrupled public spending within 10 years, nearly doubled the number of civil servants in its

employ and established a publicly-owned energy company and airline (Peter J. Smith 2001,

287).

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The early 1980s brought a decrease in world oil prices and tougher times for Alberta.

In response, the PCs privatized state-owned companies like Pacific Western Airlines and the

Alberta Telephone System and started leaving vacant civil service positions unfilled (Peter J.

Smith 2001, 291). However, serious reforms did not take place until 1992, when Ralph Klein

took charge of the Tory dynasty with a sense that Albertans no longer wanted the government

to run deficits and lose money in state-financed business ventures (Peter J. Smith 2001, 294).

Seeking to “reinvent” a government that had been in power for two decades, Klein appointed

an independent financial reform commission that included private-sector members to examine

the province’s finances. This commission “drove home the message” the government wanted

delivered to Albertans: that the province was spending too much money and cuts needed to be

made (Peter J. Smith 2001, 295).

Klein called an election in 1993, and with a renewed mandate his government set to

work implementing NPM reforms. The 1994 budget set the goal of eliminating the provincial

deficit in four years. To do this, government departments experienced an average spending cut

of 20 per cent while civil service positions were cut by a similar percentage between 1994 and

1996 (Clark 2002, 784-785). Liquor sales and motor vehicle licensing were privatized, while

many industries were left to self-regulate themselves. Further, the Klein administration made

private enterprise the model for judging government performance. It became the first

Canadian province to introduce performance indicators for measuring government

effectiveness (Peter J. Smith 2001, 299). Despite the radical transformation, Klein could point

to success – the government balanced its books in 1997, paid off its debt and boasts huge

annual surpluses.

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Ontario

Like Alberta, Ontario was ruled by a dynastic Progressive Conservative government

that was initially reluctant to impose the new neo-liberal, New Public Management

philosophy on its citizens. Under Premier Bill Davis, the Tory government intervened

forcefully to combat the unemployment and inflation of the 1970s through industrial

strategies and market intervention, including its purchase of a 25-per-cent stake in the Suncor

Oil Company following the 1973 OPEC oil shock (MacDermid and Albo 2001, 175). When

Davis retired in 1984, the race to succeed him was framed by the debate between traditional

Tories and neo-liberals, with Frank Miller – who advocated neo-liberal policy prescriptions

during the leadership race – winning the party’s crown. However, he presented a traditional

interventionist platform to the electorate during the 1986 election, vowing to spend more

money on daycare, impose rent controls, etc. (MacDermid and Albo 2001, 177). The Tories

eked out a narrow minority win over the Liberals, but were quickly thrown out of power when

the Liberals and NDP collaborated to defeat the government’s throne speech and formed a

coalition government.

The short-lived Liberal government mostly governed according to the same principles

that had guided Tory administrations during the 1970s (MacDermid and Albo 2001, 182). In

1990, Liberal Premier David Peterson called a snap election to seize on favourable poll results

and was defeated by the NDP, which had not been expecting to seize power. The NDP

attempted to implement promises that reflected its social democratic character -- including

pledges to introduce public auto insurance, raise minimum wages, increase social assistance

rates and impose rent control on landlords -- but economic circumstances forced the party to

abandon these goals and move in an opposite direction (MacDermid and Albo 2001, 187).

The 1992 recession, coupled with a freeze in federal transfer payments and resultant increases

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in welfare costs, forced the NDP to impose $4 billion in spending cuts, which made it

unpopular with its traditional supporters and the electorate.

Meanwhile, the Tories under new leader Mike Harris developed a new neo-liberal

policy framework that it started to articulate well ahead of the 1995 election. The Tory

platform, entitled the Common Sense Revolution, embodied many New Public Management

principles (MacDermid and Albo 2001, 189). The party platform packaged these changes as

“common sense” principles to reverse a decade of high taxes, mounting debt and fiscal

mismanagement associated with the Liberal and NDP governments. It promised to cut taxes

by 30 per cent, balance the budget within four years through a 20 per cent cut in spending,

downsize government and contract out several public services (Clark 2002, 785-786).

When the Tories defeated the NDP in 1995, the party quickly made good on its

promises. It slashed 10,000 public-sector jobs within two years and contracted out services

such as wastewater treatment and highway maintenance while forcing remaining government

ministries to run themselves more like businesses (MacDermid and Albo 2001, 191). On the

health-care front, it imposed new user fees, closed hospitals, allowed private-public-

partnership (P3) health centres to open, regionalized services and appointed an arm’s-length

commission to track and implement reforms. The new government forced municipalities and

school districts to amalgamate; introduced standardized testing in schools and eventually

offered vouchers to parents who wished to send their children to private and/or faith-based

schools. It privatized many services, such as the Highway 407 toll road and some parts of

Ontario Hydro, yet did not carry out a full-scale sell-off of other Crown corporations, such as

the Liquor Control Board of Ontario (LCBO) and TV Ontario (MacDermid and Albo 2001,

192). In 2003, the PCs were defeated by the Ontario Liberal Party, which reversed earlier

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policies on private education and private-sector delivery of health services, though not to the

extent promised during the campaign (Dyck 2006, 78).

Conclusion:

Few jurisdictions were immune to the wave of public-sector reform sweeping the

world at the end of the 20th century. While some national and sub-national governments

pursued reform in different ways, the most-radical transformations occurred in states that tied

reforms to neo-liberal promotion of individual freedom, limited bureaucracy and the free

market. Manitoba followed the ideas which came to define the New Public Management

paradigm to a large degree, though the evolution of these principles came about in a rather

disjointed way. After being the first Canadian province to elect what appeared to be a truly

neo-liberal government in 1977, Manitoba mainly resisted this ideological framework for

more than a decade until embracing some of its doctrines in the 1990s. By this point, other

provinces were blazing a path towards New Public Management, and Manitoba did not fully

buy into the full range of NPM ideas despite accepting the need for fiscal restraint. Whether

or not this is a good thing depends on one’s ideological persuasion. However, by examining

the evolution of New Public Management in the Keystone Province, other jurisdictions

looking to overhaul service delivery may be able to use the Manitoba experience as a guide

towards a more practical and pragmatic path to public sector reform.

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