Saturday, July 16, 2016
The pretext for Labor's claim that the Coalition was planning to "privatise" Medicare was the Turnbull government's intention to save a little money by shifting the processing of Medicare's many bank transfers from its giant cheque-writing agency, the Department of Human Services, to a private provider.
We wouldn't even have noticed this back-office switch, but Malcolm Turnbull felt obliged to swear the proposal would be abandoned.
This probably means he'll also have to give up any thought of outsourcing all the many other, pension, allowance and benefit payments the department makes.
One reason for doing so was that the department's computer system is old and clunky and needing to be replaced – a prospect that always seems to frighten governments, especially those trying to keep their budget deficit low by postponing needed asset replacement.
Since polls show the public is strongly opposed to all privatisation, it's not hard to imagine most voters wouldn't like the sound of outsourcing.
But if this realisation comes as a surprise to the Coalition, it may also be a caution to Labor, which over the years has also engaged in much outsourcing.
Much of it has gone on, at state and federal level. When a woman rang me the other day to do a government security check on someone I'd worked with, I was surprised to hear she worked, not for ASIO, but for a Canberra company called Key Vetting Services.
In principle, it's very simple. You call for tenders and if a private outfit can do the job more cheaply than your public servants can, you give it the job.
In practice, it's never simple. For a start, you can't be sure that what we're assured is saving the taxpayer money really is, once you measure it properly.
For instance, one of the ways federal and state governments seek to retain their AAA credit ratings is by using "public/private partnership" agreements to have the borrowing for motorways and other big projects done by some private enterprise. This way, the debt appears on its balance sheet rather than the government's.
Small problem: hiding the government's debt in this way ends up being far more costly to taxpayers. The oh-so-holy credit rating agencies turn a blind eye.
Federal and state departments spend a fortune each year on private sector consultancies. It's possible this saves money.
But it's also possible it was done to get around some directive to reduce staff numbers and is actually more expensive. Or maybe they got rid of people they later realised they couldn't do without, and had to pay top dollar to get 'em back.
Another dubious scheme is the sale and lease-back of government offices. The budget deficit takes a big dip in the year you sell the office off, but is worsened in subsequent years by the big rents you now pay.
These schemes are notorious for the outrageously good deals used to entice private sector players to take up the properties and rent them back.
A related version of outsourcing follows the notion that the provision of government services should be made "contestable". Services normally provided by government agencies or by non-profit community groups are opened up to for-profit providers.
Successive governments have done this with Job Services Australia, childcare centres and vocational education and training. The pink batts scheme was left entirely to for-profit providers.
With childcare, the government let one aggressive provider, ABC Learning, take over more than half the nation's centres before collapsing, at great inconvenience to parents and expense to taxpayers.
The disaster from the outsourcing of VET – again, federal and state – is still being cleaned up. The loss of future trained workers may hurt the economy for years.
Many people assume the private sector will always do things more efficiently – or less inefficiently – than those tea-drinking public servants.
Maybe. The private sector has a big advantage over the public sector: it has just one objective, to make a buck.
But what those who think this way often forget is that private sector tenderers have to undercut the public service's price and make room for their profit, which they hope to make as big as possible.
Often they do this by cutting corners on the quality of the service they deliver. Leave a loophole in your contract and they'll jump right through.
The public sector's big disadvantage is also its big advantage: it always has a range of objectives, imposed on it by politicians who know that voters will hold them responsible should the service prove really bad.
And here's a point you won't find in any textbook, but all the stuff-ups of recent years should have woken us up to: when you give businesses access to the government's coffers, a surprisingly high proportion of them lose all sense and start acting like robbers in Aladdin's cave.
Witness: all the unsafe behaviour by outfits trying to make a killing in the pink-batt boom; all the operators using inducements to sign up students for unsuitable courses, the costs of which were borrowed from the government; all the operators using the lure of permanent residence to rip off foreign students with phoney courses.
I also suspect that, for the Coalition, there's an additional, political motive: outsourcing some government service shifts economic activity to private enterprise, the part of the economy whose interests the Coalition champions, and to the people who are your friends and donors.
If so, why does outsourcing also need to save the taxpayer money?
The Turnbull government's intention to implement the Harper competition report's proposal for greater contestability in the delivery of "human services" is now likely to be approached with caution. No bad thing.