There is an old English comedy skit where the lawyer gets to his feet, peers over his glasses, and says: “”And now, ladies and gentlemen of the jury, these are the conclusions upon which I base my facts.”
This week’s report of the Senate committee into the privatisation of Telstra was like that, though doubly worse.
The Labor-Democrat majority report selected its facts upon which it based its conclusion, followed by a minority Government report with the conclusion upon which it selected its facts.
Each makes sad reading.
The Labor-Democrat side won a narrow victory on points for non sequiturs and backward reasoning.
The Labor and Democrat senators did not distinguish between partial and total privatisation. They ignored the regulatory regime that is to remain in place after a partial privatisation on a range of things like community services to regional Australia, public telephones, reporting to parliament and privacy. They ignored the fact that these things are subject to legislation over which they, as a virtual majority in the Senate, can insist stay there. Rather they thought that if the partial privatisation law went through, these things would just melt away.
They asserted that privatisation would cause job losses. As evidence for this, they proudly told how their questioning had forced Telstra to announce that in this very financial year that 9000 Telstra jobs are to go. Absurd. Telstra is in public ownership and will remain so for at least this financial year when the 9000 jobs will go.
It is fairly obvious that job losses are being caused by a combination of technological change and competition. Telstra can employ thousands of ditch-diggers swinging picks or replace them with one employee and a back-hoe, whether it is privately or publicly owned. It cannot do that, however, if its competitors are all using backhoes.
Even if Telstra reverts to a full monopoly under full public ownership, ultimately, it still might not withstand pressure of competition from outside Australia.
The absurd thing about the Labor-Democrat report is that it acknowledges that technology is driving job “”losses”.
“”People are being replaced by machines,” it says.
The majority report selected facts from the New Zealand experience, as did the minority report. Indeed, reading this report one gets the view that New Zealand is two places: one an efficient, lively nation where people have the snappiest modern service at very low prices and the other a place where an underclass of wage slaves serve a few corpulent capitalists in the cities while the rural mass eat mutton.
The Labor-Democrat senators say that the privatised New Zealand Telecom engaged in out-sourcing or contracting out to lower staff come hell or high water. It gave packages so employees could buy their vans and work as contractors. The result was poorer working conditions and lower capacity for NZ Telecom to meet service orders.
And the senators concluded: “”In spite of numerous assurances to the contrary, it has been made clear to the committee that Telstra has itself embarked on a similar course”.
Hang on a moment. Isn’t the Telstra that is embarking on the similar out-sourcing course under public ownership? And in any event, isn’t NZ Telecom fully privatised and working in a fully deregulated labour market, unlike the Telstra in Australia? The comparison is plainly invalid.
Unfortunately, the report is laced with this sort of non-thinking. The senators on both sides decided what they wanted and grabbed whatever bits and pieces from the submissions to support their conclusions.
The lack of intellectual force in the report is embarrassing enough; the fact that we as voters paid for it is galling. It is even more galling that it followed a similar exercise with the workplace reform Bill.
On the government side, the senators extolled the virtues of partial privatisation _ its efficiency, freedom and clarity of purpose. Yet in the same breath, (just to make sure the horses are not frightened) said it was a Good Thing that under the partial privatisation Telstra’s community service obligations would remain intact. Telstra would still have to report to Parliament, (including senate committees, poor sods). There would still be untimed local calls and public phones would still have to be provided. Only the power of the Minister to direct Telstra personally would be removed, the government senators said, but hastened to add that this was never used so it did not matter.
The Government senators applauded all the fact that so many of the fetters of public ownership would remain in place.
The Government senators at least pointed out that a partially privatised Telstra would be subject to corporate-law reporting and the market rigor that comes with a listed share price. That price is a benchmark of performance. If Telstra is not performing you get a sell-off and a lower share price. Management and employees become more efficient to turn it around, especially if there are employee shareholdings and incentives. These things dilute political imperatives, such a improving public phone booths in marginal electorates. They also get rid of Loans Council requirements and political pressure on raising capital and Telstra can go into joint ventures.
At least the Labor-Democrat side made a good case against linking the Telstra sale with the environment fund. Surely, if the environment should be fixed, then fix it and if Telstra should be sold, then sell it. The linking is shallow political manipulation and reveals a lack of faith by the government in its ability to present a cogent case for sale and an inability to set policy priorities.
But neither side made a cogent case one way or the other. Technological change, competition and the general regulatory environment are far more important than ownership in the communications industry. The first three are more important, for example, than the last in eroding union power _ that unspoken bogey on the government side. And they are more important in determining the type and cost of services than ownership. This is the common thread in the evidence put to the committee from Australian and overseas experience.
In a competitive environment people have to work better, whether in the public or private sector.
Even so, there may be some further advantages in partial or full privatisation. But the Government has not made them out very well.
Further, the government side is yet to address the feeling (right or wrong) that the third of Telstra will end up in the hands of the presently well-off who can afford to buy the shares and that the rest of the community will not get value for money. It has not addressed the suspicion that much of the private shareholding will be bought negatively geared so the Government will be underwriting the purchase of its own asset. Further, most of the dividends will go out untaxed under the imputation scheme.
Maybe, it should have taken a leaf out of National Mutual’s book. Here was a mutually owned asset (just like Telstra is mutually owned by the whole Australian community). National Mutual wanted the benefits of privatisation and share-listing, so it said to its members you can either have the cash or take the shares.
The Government could have said to the 20 million mutual owners of Telstra that it wants to privatise a third or $8 billion worth. Each has an option of $400 in cash paid at tax-return time or with social security, or 400 $1 shares. Applications for further shares would be taken to finance the cash pay-outs of those who do not take up their “”free” shares.
It wouldmake for a very large share register, but the very technology that is making Telstra (private or public) lean and mean can easily cope with that.
The Democrats and Labor would invite electoral fury to reject that sort of demutualisation scheme.