The three volumes of the Commission of Audit report released today form an impressive guide to the reform of the Queensland Government over the rest of the decade. With solid analysis of policy issues across the wide range of public services in Queensland, and strong arguments in support of greater outsourcing and privatisation, the report will have a long shelf life. I have no doubt the report will one day be cited as instrumental in the inevitable privatisation of Energex and Ergon, which unfortunately the Government in its response today has rejected for now, even though sales proceeds would pay off a big chunk of State debt, as Commission head Peter Costello pointed out on tonight’s 7.30 Report.
Although some of the Commission’s recommendations were rejected, the Government has committed to implementing a large number of them and there is doubt the implementation of many of the Commission’s recommendations (e.g. contestability of public transport services, commercialisation of TAFE, among others) will have profound consequences for public service delivery and will drive efficiency and productivity improvements.
While on the theme of public sector efficiency, I should note the Centre for Independent Studies’s recently set up website Waste Watch, which is dedicated to identifying what it considers wasteful uses of public funds, such as $10k for yoga at Parliament House in Canberra.
This is an issue of great interest to me. With my wife and I both being Queensland public servants, more than ever I fear the sword of Damocles hanging over our heads. We are going hell for leather paying down our house as quick as possible (having bought in 1999 and never having extended the size of the loan, our debt is tiny compared to that which is typical today, so that’s one thing at least).
I’m not convinced that much positive will arise from this ideological drive – with the biggest resource investment boom in history peaking or about to peak, the Newman government may simply be pursuing a pro-cyclical path of cutting into a downturn, worsening it in the process and sucking demand out of the economy through deep cuts in the public sectors contribution to the economy.
I also saw it mentioned that some significant beneficiaries of an outsourcing drive would be mates of the bloke who wrote the report himself, but I guess that’s par for the course.
Let’s see what eventuates from all of this.
Yes, the Government will need to be careful any future cuts don’t coincide with a downturn. To a large extent, it appears implementing the Commission’s recommendations won’t mean a large reduction in spending but a reallocation of spending – e.g. from the public service to private contractors – so total Government spending may not be affected that much. Of course, this reallocation of spending may have a human cost if people lose their jobs, and I suspect the Government may move cautiously because it realises it won’t be popular if it moves too fast.
Gene, have they released a report detailing the methodology of how they arrived at their conclusions? I had a quick look at part of the comission of audit report but I don’t have the time to go over it in depth, nor the training to interpret all parts of it (probably).
What I have read so far suggests that the document is built on an assertion for which very little in the way of evidence is provided – namely that the private sector is nearly always better at doing anything than government. The body of evidence for this claim seems to largely boil down to “coz everybody knows it just is”. It seems to me that a huge change in public policy is being based upon an article of faith rather than a lot of hard evidence.
We have all witnessed some less than optimal outcomes and even some disasters resulting from privatisation (Telstra springs to mind). And even some laughable ironies, such as the privatised UK electricity industry being bought up by a GOC owned by the French government, so that the industry is once again publicly owned but this time by the government of their age-old rival across the channel, who no doubt skims off the benefits and diverts them into the French economy rather than the UK economy.
At the end of the day, I think it stands to reason that an entity cannot be run for both maximum public benefit and maximum shareholder returns simultaneously, one must subjugate the other – which one do you think that is? This issue needs to be approached with great caution but I fear that ideology will trump such caution.
I can’t recall any specific studies being cited in the report (I’ll have to look tomorrow) but there is evidence in international studies of cost savings from out-sourcing where it’s done right. As you suggest, there are risks involved if the process isn’t well managed.
Public goods and services aren’t really about cost savings though Gene, they are about delivering imporant things that the private sector either can’t or won’t deliver. Handing them over to the private sector to manage (while still being payed for out of the public purse) doesn’t automatically create better outcomes because the entity’s core priority is necessarily altered – private profit/shareholder return must be the first consideration.
Some years ago here in Gladstone, the privately-run water retailer decided it was going to act in exactly that fashion. It announced that water rates would now be charged according to a model that made more sense from a private enterprise point of veiw. Depending on where you lived in the area, water bills were to rise by up to 300%. The company issued a media statement, saying that “people need to understand that water is a business and that business must profit”. Well the people did not agree with their outlook and a furore erupted – the very embarassed QLD government was forced to intervene (Beattie from memory) and water costs sayed as they were. So while there is much scope for things to go wrong, the whole point is that just paying a private business to manage a service to the public doesn’t mean that it’s going to work any better. It may even run worse from the publics point of veiw as it naturally seeks to maximise private return.
Really – are the state’s finances that dire? Comparisons with places like Spain seem ridiculous. A third of QLD government debt is gauranteed by the federal government anyway, while no such arrangement exists in the Eurozone. Projecting growth in the size of a debt 30 years into the future seems even less likely to be on the mark than federal treasury shorter-term forecasts.