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Privatization or How to Lose an Election

Institute for 21st Century Problem Solving

The history of privatization and public-private partnerships (PPP’s) across the Anglosphere and in Australia in particular has produced less than spectacular results. Nonetheless, governments on both the left and the right persist with this strategy as a means of debt reduction notwithstanding the fact that once sold it is gone forever. The most recent case is the Newman government in Queensland, which suffered a spectacular defeat as was predicted in an earlier paper when the public weren't willing to go along with its “sell the farm” program.

Notwithstanding the impact that an all-out privatization program has had on the prospects of re-election of its past promoters, there are certain categories of public enterprise less likely to result  in a career ending outcome. This paper explores the most and least problematic categories as they are likely to impact the upcoming NSW election.

In a survey conducted immediately prior to the 2013 federal election, public sensitivity to privatization of government assets and services was comprehensively tested on a representative national sample of more than 5300 Australians including a representative cross-section from NSW of more than 1800 respondents. The survey was conducted online by opinion pollsters Australian Opinion Research which provides quantitative research services for the social and business research group Checkmate Analytics.

The questionnaire listed a broad variety of government enterprises and services and asked what category of ownership was preferred i.e.. exclusively public, exclusively private or a mix of both public and private options. By adding together those who preferred an exclusively private or public & private mix for each category, the researchers created a sensitivity-to-privatization ranking and the results as they apply to NSW state government enterprises are shown below:

Sensitivity Ranking (greatest to least sensitivity)

(Based on percentage in favour of either private ownership only or a mix of both private and public enterprises in the category)

                                                  Sensitivity Ranking (Most sensitive to least sensitive)

  1. Prisons                                     (18%)
  2. Underground Rail Security       (24%)
  3. Airport Security                        (24%)
  4. Railways                                   (26%)
  5. Workers Comp                         (27%)
  6. Electricity                                  (33%)
  7. Buses & Light Rail                    (34%)
  8. Gas                                          (36%)
  9. Schools                                    (37%)
  10. Hospitals                                  (42%)
  11. CCTV Cameras                        (43%)
  12. Preschool care                         (55%)
  13. Insurance                                 (67%)
  14. Airlines                                     (74%)

 

Any time the Sensitivity Ranking shows support falling below 50%, privatization could become troublesome for governments. Below 40%, it starts to get politically dangerous especially if it is likely to affect the public financially e.g. energy costs. However, once support is around 30% or less, then continuance of privatization around that item is hardly more than a death wish by those in power or seeking power as the former Newman government in Queensland can now testify. In earlier papers we noted that cost of living was the major driver of the 2013 election, in particular as it related to energy costs. The LNP opposition focussed much of its effort on removal of the carbon tax as the means by which it could lower energy prices and improve the cost of living equation yet according to a very recent report, Australia still has some of the highest energy costs in the Western world[1].

With several global consortiums along with their global investment bank proponents lining up to take control of energy and by proxy retail energy policy in NSW, the NSW government could be deluded into thinking it was all systems go. The reality from not only our research but the more general polling is that NSW voters like their Queensland counterparts before them are saying nix! These groups which not so long ago were lined up behind the ousted Newman government in Queensland, have now turned their attention to NSW and will move onto their next prospective government seller if the NSW privatization bid fails.

Attitudes differ very little between the key political parties among NSW respondents notwithstanding that the election surveyed was federal. Data serve nonetheless to demonstrate a bi-partisan preference among voters for energy assets (notably electricity but also gas) to remain in the hands of government. Of 1382 NSW respondents who answered the question in the aforementioned 2013 pre-election survey, 58% of federal Liberal voters, 60% of federal Green voters and 64% of federal Labor voters preferred electricity assets to remain in the hands of government.

On a more sensitive note, although not at this stage tested, it is conceivable that a majority of voters are unaware that global corporations manage much of Australia's security and detention services both at federal and state level. For example, the main prison contractors also handle immigration detention centres but being of UK origin, they may attract less public antipathy than non Anglo-American corporations. Nevertheless, these providers are not without controversy, both having been caught out massively overcharging their government clients on a number of occasions.

The other category meeting significant resistance to privatization is airport and underground rail security. In the case of the latter, this service has been provided in NSW for many years by an Israeli security corporation which is also no stranger to controversy. That organization controls security in Sydney underground rail and elsewhere around the country. It also controls security for the London Tube among other activities and was in charge prior to the 7/7 London bombing. It also manages speed cameras and CCTV cameras in its portfolio of services. The public is of the view that these activities are better left in the hands of government enterprises who are ultimately accountable to it.

Given that Israel is rated by Australians equally with Saudi Arabia in terms of friendship (34%), well below the USA (91%) or even China (62%), it is likely to be of some concern to the NSW public given underground rail security which posts one of the highest privatization resistance ratings tested, is run by an Israeli corporation.

Source: Australian Opinion Research, March 2012 , asked a representative cross section of 4294 Australians 18+ online; "Which countries should Australia treat as friends, neutrals and enemies?"       The percentages are shown in the graph below.

Australlias Friends 1

Airport security, railways, workers compensation, electricity and gas are all high risk privatization targets but there are several areas where governments have greater freedom to move. Missing from the list is government buildings which was omitted from the original question but may also offer an area of opportunity.

 

 

 

 

 

 

 


[1] Australian Financial Review, Feb 11, 2015, p4 “Australians Gouged”, Writer Gareth Hutchens.

 

 

 

 

 

 

 

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