Does it follow? Does it follow that if Victoria and NSW privatise and deregulate certain industries that the ACT must follow suit? We can expect a new round in the privatisation debate in the ACT in the next few months. With the election over, there are no voters to scare, so the issues can be more fearless canvassed by the Government. Moreover the balance in the Assembly has changed a little with the Government requiring only the Osborne independents to vote with it to get its way. Indeed, at present the Government can privatise without separate legislation, but any instance is subject to new legislative veto if a majority in the Assembly agreed.
One of the troubles with the privatisation debate is that is easy to point to benefits individuals might get from government ownership, regulation or subsidy, but it is hard to quantify the benefits to the community as a whole from lower taxes and more efficient use of resources.
It is easy to argue for regular bus routes with subsidised fares. The harder argument is that in favour of getting rid of mostly empty buses, burning fuel on uneconomic bus routes.
It is nice to have the lower prices from subsidised milk, water and electricity, but it is neither environmentally or economically efficient. And should the state profit from promoting gambling through the TAB? Also, is it fair to private operators in a field to have to compete against a subsidised public operator, as in the case with Ecowise, Actew’s fully owned electrical contracting company.
Since the Hilmer reforms of 1996, state and territories are required to impose competitive regimes on their commercial operations or they do not get a range of federal financial benefits.
The Hilmer report pointed to large savings if the states and territories were forced into competitive arrangements. Monopolies and subsidisation typically caused inefficiency which ultimately was borne by the taxpayer. But the corrosive nature of the arrangements was such that the taxpayer was lulled into a false sense of gain because the benefits were tangible while the detriment was hidden. Politically, there as no incentive for reform without a federal cash reward system. The ACT now has to respond to that environment. There has been talk about the TAB, milk, the buses and Actew (water, electricity and Ecowise).
In an earlier time, many functions were only capable of being performed by government, because only government could raise the investment money. Some functions were seen as being of national importance. In the 1950s, for example, the provision of healthy milk was seen as being of national importance requiring a lot of regulation for the sake of the babies of the nation. Nowadays it is hard to justify milk being treated differently from any other foodstuff. Regulation should be only a safety matter, not a marketing one.
It is not a question of saying all privatisations are good. Freeways, for example, have proved not to be wise candidates for privatisation. And it is not a question of saying all monopolies are bad and all competition is good. Private competitive defence forces would seem a folly. But each privatisation should be justified as should each activity that stays in public ownership.
There are many benefits to competition and privatisation. Taxpayers’ money is freed for things the private sector will not do, like education and health for those who cannot afford it. Subsidies to activities a government wants to support have to become line items in the budget and more open to public scrutiny, rather than channelled through a government enterprise. (If government wants to give money to racing, it should be done as a grant that we can all see, rather than as a percentage of TAB turnover. If it wants to support the Brumbies and the corporate box at matches it should do so as a grant and justify it in the Assembly, not spirit it through ACT Milk’s accounts.) Competition makes people strive harder. Private enterprise can take risks that cannot be taken with public money.
But there is a down side. Private companies are less accountable, less transparent and less attuned to social needs. But special requirements for the needy can be accommodated in legislation.
There is a public good in ensuring the aged and poor get electricity and water and do not get it cut off unreasonably. But there is also a public good in them having access to bread, a newspaper and so on. In many cases, it is more efficient (and therefore likely to raise the standards of all) to take the advantages of privatisation and competition and ensure the social need through direct grants.
That said, some social objectives would require a very stern hand and some tough regulation. It might be good for a private water or electric company to encourage consumption, but it would not be good for the community as a whole. If a private company cannot meet environmental standards, it might be better to keep it public.
Another problem with privatisation is that all too often governments flog off enterprises too cheaply, mainly because they want it to be seen as a success. Indeed, an oversubscribed float would best be described as a failure. The main beneficiaries are the wealthy who can afford shares. To ensure equity, it might be better to give shares to customers in major utilities.
The main concern with privatisation and competition is that despite their many benefits they can be used (and have been used) as vehicles for the transfer of wealth, usually to the already wealthy. It seems governments have not been capable of preventing that; that is why they are treated with such suspicion, but it need not have been that way.