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September 2004 | |
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Interview: True Matilda Politics: State of Play Industrial: Capital Dilemmas Unions: Rhodes Scholars National Focus: Rennovating the Lodge International: People Power Economics: A Bit Rich History: Mine Shafts Safety: Sick Of Fighting Organising: Building a Wave Poetry: Anger In The Bush(es) Review: The Battle Of Algiers Culture: The Word On The Street
The Soapbox Politics Postcard The Locker Room Postcard
Interest Overboard
 Gold Gold Gold for NeolibsCo-operating At All CostsFan MailAll Good Except You
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Industrial Capital Dilemmas
When it comes to infrastructure, NSW is in deep strife. That's the one thing everyone - Left, Right, and in-between - seems to agree on. Surveys and polls suggest Joe and Joanne Public are onside as well. It all stems back, apparently, to the mid-70s, the oil crisis and the escalating interest rates that came with it. Frightened governments, across the western world, decided they could no longer commit taxpayers to high levels of public borrowing. As a result, 30 years down the track, we face meltdown. Think hospitals, roads, railways, schools, water, electricity and other core services relied on by public and business alike. Left-leaning Newcastle University Professor, Bill Mitchell, and John Bowyer, head of financial services giant ABN AMRO, concur - something has to be done. "The majority of our state governments have built up surpluses by running down public infrastructure but it is a myopic policy," Mitchell told a Sydney conference, last month. "Every day, we hear the private sector complaining about the lack of skilled labour and that's one of the results of government withdrawal." The AMRO man was even more direct. "We have a major problem with infrastructure in this country and, to maintain our standard of living, we have to address it," Bowyer said. The pair were addressing trade unionists at a conference organised by the NSW Labor Council to consider the push for Public Private Partnerships (PPPs). That's the Australian version of a funding model developed by Tony Blair's British Government under the acronym PFI (private finance initiative). Guardian columnist George Monbiot, for one, sees the British version as just another way in which private enterprise stitches up the public. He suggests the initials could more accurately represent Public Fraud Initiative. But you don't have to go across the sea to England to encounter that sort of response. ACTU chief, Sharan Burrow, lashes the "five percent club", the middle men at the heart of PPP financing, who rake off tens of millions for putting the deals together. The whole process, she says, is a curious thing in an age of economic rationalism. "It allows government to keep infrastructure spending off their books," Burrow says. "The virtue of appearing to deliver small government is seen to exceed that of obtaining facilities for the community at the best price and with the highest standards of corporate governance". Which all folds back into the detractors contention that "commercial in-confidence", prevents any rational assessment of whether or not the public is getting value for its millions, and sometimes billions of dollars. But let's stop right there. Labor Council staged its conference because secretary, John Robertson, wants a rational response to a phenomenon coming at the union movement like a train - well, at least like they used to come before governments cut back on investment. "Our biggest danger is not really knowing what we are talking about, producing a knee-jerk reaction to something we don't fully understand," Robertson says. "It's time unions got proactive about a number of things and this is one of them." Robertson wants affiliates to get together in sectors - transport, health, education etc - work through their issues and what PPP proposals mean to them. He sees them thinking strategically so they are not caught off balance when proposals arise, as they surely will. State Governments across the continent have tied rejuvenating infrastructure to PPPs. Victoria is out in front and waving around what can only be described as a "mixed" report card. Contract penalties cost Victorians $118 million to cover electricity price rises when the industry moved to full competition; they handed over an additional $105 million to public transport operators Connex, National Express and Yarra Trams; not to mention $65 million to ticket machine operator, Onelink. All that, before being handed back large chunks of public transport when the private operator shot through because it couldn't turn a quid. Burrow argues a whole raft of cascading fees, penalty payments, legal costs and public subsidies aren't even factored into "public sector comparators" used by Treasuries to decide private enterprise is more efficient. Monbiot goes ballistic about this process, making "private sector comparators" in the UK sound a lot like the terms of reference for our Cole Royal Commission into the Building and Construction Industry. Monetarist governments supported by monetarist bureaucracies, he argues, come up with monetarist answers because their "comparators" are fixed from the off. Bowyer, however, tells a different story. The NSW's Government first PPP involved his company building nine new public schools in Sydney's west and maintaining the buildings for 30 years, after which, they revert to state ownership. He sees it as a win-win situation providing good facilities for thousands of youngsters, without the government having to raise millions of dollars. For seven years after the contract finishes, he points out, private enterprise carries the cost of repairs to ensure it maintains standards to the end of the contract. "We build, maintain and manage the facilities for 30 years while the core education services are provided by the state. We support that model, we don't want to take over the teaching," Bowyer says. Robertson suspects the NSW government has made a rod for its own back by describing an asset management contract as a PPP - "which it's not". In the UK, he said, the private sector built and effectively owned schools for the duration of contracts. The state leased them for school hours and the operator sought to make additional money by outside leasing agreements, effectively privatising the properties. "PFIs, as I understand them in the UK, saw the private sector providing public services. That is not happening here, to this point," Robertson says. "There is a difference between the provision of infrastructure and the provision of service. I am not saying what our response should be in every circumstance, but I am saying we should understand the difference." Robertson sees service delivery as the real risk to the public. He envisages limited liability companies, one step removed from the parent, simply upping stakes and walking away if their sums don't add up. "It doesn't matter what contract penalties you have when you can't lay a finger on the holder of the assets," he says. "And, with service delivery, the state has to step in and keep it running." Workers Online understands that's exactly what happened after Melbourne's suburban trains were effectively privatised by the Kennett regime. The contract was with a subsidiary of a multinational that simply shut up shop and left the Mexicans to pick up the pieces. Professor Mitchell argues that an irrational fear of debt is the motor that drives modern government to "privatisation by stealth". "The beachhead of this debate is whether or not we want governments to borrow on our behalves," he says. "The simple idea that government borrowing is bad has to be challenged. State government borrowing is good if it provides quality infrastructure, like roads and rail, that meet the needs of its citizens and the private sector can leverage off. "Government borrowing is certainly bad if it builds statues of political leaders or memorials to royal weddings. When it comes to infrastructure, government is our agent." It is an argument the PSA's Steve Turner takes up. He says that billions of dollars of NSW debt is repayable at one percent interest. With commercial rates running above six percent and inflation around four, he argues, the Treasurer's "debt elimination policy" is more ideological than fiscal. "If, effectively, you can make three percent for the people of NSW, why wouldn't you?" he asks. The next NSW proposal is for the outsourcing of maintenance for new railways rolling stock. Robertson sees that as one step, albeit small, on the journey from pure asset management to genuine PPP. It hints at the argument of critics who claim that, of course, the government will open its program with benign agreements but that, once these are accepted, it will zero in on more contentious targets. And that, Robertson says, is exactly why unions have to be aware of what is happening and clear where their bottoms lines are going to be drawn.
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