Home > Economic policy > Electricity privatisation in Queensland

Electricity privatisation in Queensland

March 6th, 2013

I’ve just released a report I prepared on electricity privatisation in Queensland[1] This was a bit difficult given that the Costello Commission’s proposals have been announced with great fanfare, but the supporting analysis is so secret that even Campbell Newman claims not to have seen a copy. This Courier-Mail story by Paul Syvret gives the basic points

The report is online here.

fn1. It’s partly a followup from my previous response to Costello’s Interim Report. As in that case, I’m not getting paid for this, and it’s entirely my own work. So, it’s not as polished as the Costello report will doubtless be when it comes out, but I can confidently say it’s better value for money for the Queensland public.

Categories: Economic policy Tags:
  1. TerjeP
    March 6th, 2013 at 12:33 | #1

    A minor nit pick is that saying an argument is wrong is quite different to saying an argument is invalid. I think you meant to say that the balance sheet argument and the market reform argument are both wrong rather than that they are invalid.

    Your argument against the market reform benefit seems to hinge on empirical experience as follows:-

    a) Prices went up.
    b) Voters didn’t like it.

    On this basis a government that ends fuel subsidies or ends price caps on fuel is going to be guilty of doing something that has no merit as a market reform. However I’d be quite surprised if you believe this and support fuel subsidies or price caps on fuel. Both of which are quite diabolical policy ideas.

    Prices rising and voters not liking a given reform does not amount to any sort of indication that the reform is a bad one. I’m a bit surprised that you would build your argument on such foundations. They are the basis for a good political arguments not good economic argument.

  2. Uncle Milton
    March 6th, 2013 at 12:41 | #2

    There was a report by electricity analyst Bruce Mountain a couple of years ago, for the Electricity Uses Association, that showed government-owned distribution companies had higher price rises than privately owned ones, after allowing for other causes of price rises. I’d need to check but I think the reason was that government-owned companies caved in to pressure from state governments to raise prices so as to send dividends to shore up budgets.

    Pre-empting the obvious retort, Mountain is no right wing ideologue. He is just against things that put electricity prices up unnecessarily.

  3. Jim
    March 6th, 2013 at 12:55 | #3

    Once again we have privitisation being pushed by politicians without any transparent or robust consideration of the actual benefits and costs. Same story. Different party.

    Once again, we have a State Treasury that has been silenced, or is too timid to provide the transparent, frank and fearless economic advice we pay them to provide. No saving their own butts going on there.

    Once again, we are about the see the conga line of lemming-like corporate advisors and financiers trotting out their praise of asset sales. No vested interest in future fees generation there.

    One again we won’t get a balanced and robust debate because of entrenched views and vested interests.

    Once again, the solution is a genuinely independent and robust analysis of the benefits and costs of asset sales. This is highly unlikely given the propensity of governments to avoid undertaking (or funding) such analysis at all costs.

    Once again we deserve better but won’t get it.

  4. Gerard
    March 6th, 2013 at 13:47 | #4

    Absolutely agree John. No real justification for doing it and a lot of justification for not privatising.

    From my experience having spent 15 years in and advising governments at all levels about delivering and funding infrastructure you get to see a lot of people making recommendations for ideological reasons, for personal or professional gains or because they are too lazy to actually do the right thing. I blogged a bit about it last year http://www.redhotinnovation.com.au/privatisation-an-answer-for-a-lazy-government/

    The other big concern I have is just the loss of adaptability in the energy sector when you privatise. Climate change and major technological changes occurring in the energy sector the whole concept of an energy grid that was the foundation of previous rounds of privatisations just wont make sense in future. We cant adapt to a more modern energy sector when it is all privately held http://www.redhotinnovation.com.au/cheap-sustainable-electricity/

  5. John Quiggin
    March 6th, 2013 at 14:44 | #5

    @TerjeP

    1. The reforms were supposed to lower prices
    2. Higher prices mean either higher costs or higher profits
    2. If the industry is foreign-owned (post-privatisation, it normally is), there is a social loss in either case

  6. John Quiggin
    March 6th, 2013 at 14:48 | #6

    @Uncle Milton

    Couldn’t find this, but worth observing that EUAA represents interests of business users, who have generally benefitted from reform, at least when compared to residential. So, I guess I’m not convinced that Mountain is simply interested in keeping prices low.

  7. Jim Rose
    March 6th, 2013 at 16:09 | #7

    Is there something about state owned enterprises that makes them prone to make bad deals such as this?

    Governments are so incompetent an owner and so incapable of running a process free of politics that governments cannot even sell a state owned enterprise for a good price under the full glare of the media and the public. Imagine how hopeless day to day state owned enterprise decision making is?

    Too many policies and ideas of the Left assumed that they are the face of the future, rather than just another political party that will hold power as often as not.

    The rotation of power is common in democracies, and the worst rise to the top.

    So it is wise to design constitutional safeguards to minimise the damage done when those crazies to the right or left of you get their chance in office, as they will.

    Privatisation and deregulation is a lot slower in a federal system with an effective upper house elected by proportional representation.

    Regulatory powers and public ownership is spread over different levels of federations, with different parties in power at various levels at the same time, all worried about losing office by going to far away from what the majority wants.

    The will of the people is constantly tested and measured in a federal system with elections at one level or another every year.

  8. Peter Smith
    March 6th, 2013 at 16:23 | #8

    John, I believe that in the Westminster system of government the public service must follow the current government’s policies, however silly they may be. In private communications it can attempt to introduce sanity into the proceedings, but if that fails, government policy must be supported. I should think the only alternative would be resignations, which would only leave the government more unrestrained. So, it is neither significant nor relevant that the Treasury supported the governments’ contradictory policies in public.

    Otherwise I agree with everything you say.

  9. John Quiggin
    March 6th, 2013 at 16:52 | #9

    @Peter Smith

    This point is outside my area of expertise. Any experts on the Westminster system who would like to comment, link to useful info etc?

  10. TerjeP
    March 6th, 2013 at 17:25 | #10

    John Quiggin :
    @TerjeP
    1. The reforms were supposed to lower prices
    2. Higher prices mean either higher costs or higher profits
    2. If the industry is foreign-owned (post-privatisation, it normally is), there is a social loss in either case

    1. You may be right. Although I don’t know if this was the policy reason or simply part of the political sell. I can’t comment too much on this as I wasn’t interment with the arguments put out at the time.

    2. In moving from a government provider to competitive private providers the carve up of benefits between consumers, workers and owners is bound to change. The politicians are hoping it flows mostly to consumers. The workers want it to flow to them. The investors are obviously seeing themselves as possible winners. Higher operating costs may not be a bad thing. For instance if the higher cost was due to stronger wages then obviously it is good for the workers concerned. From a reform perspective the carve up of benefits is of less concern than the economic efficiency of resource use. In other words does it free up resources for use elsewhere in the economy. Or does it soak up more resources to achieve the same ends. I’m not saying it did either way but I would think this is the key measure of success.

    3. Only if the enterprise is sold too cheap. My preferred model would be to corporatise the entity and then gift the shares to customers over a number of years based on power usage rather than to sell the asset. That way any windfall in profits flows back to the customers anyway. Admitedly this is a bit harder to administer.

  11. Jim Rose
    March 6th, 2013 at 20:17 | #11

    John, see http://www.bartleby.com/36/1/23.html for Machiavelli’s The Prince. chapter XXIII. That Flatterers Should Be Shunned

    1. the prince should discourage every one from obtruding advice on matters on which it is not sought

    2. a prudent Prince should follow a middle course, by choosing certain discreet men from among his subjects, and allowing them alone free leave to speak their minds on any matter on which he asks their opinion, and on none other. But he ought to ask their opinion on everything, and after hearing what they have to say, should reflect and judge for himself.

    I can’t find the passage about harshly punishing advisors who do not speak with 100% candour when their advice is sought.

    many a modern politican have lost the art of the demanding honest advice, and promoting those who stand up to them (in private).

  12. Ikonoclast
    March 6th, 2013 at 21:31 | #12

    I am no expert but I believe public servants in Australia are required to follow the lawful and reasonable directions of superiors and finally of the government. The nub of it is the “lawful and reasonable” part. There may be cases where an individual finds a direction unreasonable on personal or moral grounds. In turn an internal review panel or a tribunal or a court may find the refusal to work to direction valid or invalid.

    Many years ago as a young clerk in DSS, I point-blank refused all supervisor directives (which were technically and legally correct) to delay unemployment benefits to sacked strikers. Of course, someone else was given the work and it was done. I was quietly moved to the pensions team. It was a more relaxed and sensible era, managerially at least.

  13. Gerard
    March 6th, 2013 at 23:11 | #13

    @John Quiggin
    I always thought the public service where supposed to provide frank and fearless advice on what is in the interests of the public.

  14. Jordan
    March 7th, 2013 at 04:05 | #14

    @Gerard
    Another risk from privatization solution for lazy government is that after privatization it will have even less responsibilities which will make it lazy even more and then many bureacrats will have time to consider personal benefits of a position. And more time to search for false advices to the public, while giving more toughts on ways for holding such power.

    Once a lazy government decide to reduce its own responsibilities even more it goes into the spiral of bad to worse and worse government toward disabling institutions of a society to solve problems.

  15. TerjeP
    March 7th, 2013 at 05:29 | #15

    Jordan – I’d say the opposite. Once a government devolves itself of certain responsibilities via privatisation it becomes a more responsible institution.

  16. Jordan
    March 7th, 2013 at 07:03 | #16

    @TerjeP
    By what reasoning, government become more responsible by taking less responsibilities?

  17. TerjeP
    March 7th, 2013 at 07:22 | #17

    I don’t think it is responsible to take on an excess of responsibilities. For example I could probably feed and cloth my children for the rest of my life but I’m working towards the day when they do that stuff for themselves. I think it is very responsible to pass responsibility and independence to others in an orderly manner. The same is true of one institution passing responsibility to another (eg from government to a private company). Trying to do everything yourself is a recipe for most things being done poorly.

  18. rog
    March 7th, 2013 at 07:26 | #18

    @Gerard Public service is governed by an Act and are accountable to Govt Parliament and public.

  19. Gerard
    March 7th, 2013 at 07:27 | #19

    @TerjeP

    I am unsure how the concept of “competitive provider” plays out in reality when you are talking about assets that dont exist in any real market. Yes there is notionally a national electricity market, but it is so heavily regulated that it cannot operate as a proper market – pricing is controlled, access constrained and competition limited. A great example was Grid X – they were actually competing in the market place by providing new technology and good energy solutions right up until the regulator decided that it wasn’t in the interests of the other players in the market and set such high conditions on them that it drove them out of the residential market.

    Similarly when you are looking at a coal port, theoretically there are other coal ports, but the project will generally only be viable through a particular port. So again regulation is supposed to drive the behaviour to not price gouge. All it does it drive behaviour of making sure the price gouging isn’t too obvious.

    Where a true competitive market exists, I can see benefit. Where the market is created, false, or so heavily regulated then government needs to retain ownership.

  20. Ikonoclast
    March 7th, 2013 at 07:33 | #20

    @Gerard

    I am sure you are being ironic with your “frank and fearless” comment. Frank and fearless advice went out a long time ago. H.C. “Nugget” Coombs may have been the last significant “frank and fearless” public servant Australia ever had. A few others probably could be included, like Charles Perkins.

    The attacks on security of tenure of top public servants, moves to contracts, pseudo board structures, corporatisation and privatisation have all removed much of the capacity of the public service to provide frank and fearless advice. The standards of governement, governance and administration have all declined as a result.

  21. Gerard
    March 7th, 2013 at 07:35 | #21

    @rog
    I know that that is the theory, but general practice is that they are accountable to their Ministers only. When was the last time a public servant was held to account for a poor decision they made?

  22. TerjeP
    March 7th, 2013 at 08:07 | #22

    Gerard – there is a real electricity market in which buyers and sellers participate on a daily basis.

  23. Ikonoclast
    March 7th, 2013 at 08:11 | #23

    @Gerard

    To some extent, Gerard, you are talking about natural monopolies here. Many kinds of major infrastructure are in fact natural monopolies; especially in small to mid-size countries population wise. Clear examples are electricity grids, water grids, roads systems, communication infrastructures and railways. The monopoly is natural usually because one infrastructure “grid” can serve the market more efficiently than two or more parallel duplicated grids and/or because capital costs are very high compared to the total size of the market. Natural monopolies may exist at national and/or at regional levels.

    All attempts to create competitive markets out of natural monopoly markets involve artificial regulatory regimes which attempt to concoct a free market out of a natural monopoly market situation. This merely creates opportunities for lobbying and rent-seeking behaviours. It is more efficient and more equitable to keep many natural monopolies in government ownership and to allow the profits of natural monopoly accrue to all the people as a social asset.

    Many large natural monopolies are also national strategic assets; strategic in the economic, social and military senses. Allowing control of these strategic assets to move to private ownership, even to foreign private ownership, is not in the national interest and can and does constitute a threat to national security. The bottom line is that when vital infrastructure is threatened or compromised by acts of nature or acts of war and a private monopolist fails or lacks the resources to protect and maintain it, the state must step in anyway.

    It’s better for all these reasons to keep natural monopolies in state hands.

    The converse argument is simply about opportunist plundering. The privatisation argument and process (when applied to natural monoplies and strategic essential infrastructure) is simply about stealing the common wealth of many and putting it into the pockets of the few. It’s a piratical venture pure and simple. Privatisers are pirates and thieves.

    The thievery is accomplished very simply. The state assets are under-priced for a number of reasons;

    (a) private capital has an interest in seeing the assets under-priced;
    (b) the privatising government as a set of individuals has a personal interest and acts as the suborned and bribed agent of private capital;
    (c) the privatising government has a political interest in a quick sale. Quick sales look successful and are achieved by under-pricing.
    (d) once established as a private monopoly price gouging becomes the order of the day.

    It’s audacious and very simple essentially.

  24. TerjeP
    March 7th, 2013 at 08:49 | #24

    Distribution grids are easentially monopolies. Power stations are not in the same category as grids.

  25. Ikonoclast
    March 7th, 2013 at 08:55 | #25

    @TerjeP

    It’s not a real market, TrejeP. It’s an artificially concocted market. Gerard has already explained, “there is notionally a national electricity market, but it is so heavily regulated that it cannot operate as a proper market – pricing is controlled, access constrained and competition limited.” He then gave an example. As always, you ignore real world evidence and repeat your dogmas.

    Of course, there is a reason that it is an artificially concocted market and that is because it has natural monopoly features which have to be overcome by artifice to give the appearance or semblance of a naturally competitive market.

    Electricity is admittedly a complex area in terms of market theory. It is not a neat situation which can be simplistically characterised as a pure natural monopoly market or a pure natural competitive market. Retail distribution networks (poles, wires, substations, transformers) have strong features which make them natural regional monopolies. High voltage long-distance transmission has features which tend to make it a natural national monopoly or a natural duopoly at best (in terms of back-up or duplicate capacity). Generators have features (in concert with the complete transmission network) which make them at once both natural regional monopolies (without regional import and export of electrivity) and yet oligopolies (at best) at the national level. With generators there is still the issue of the high capital cost which acts as a barrier to new entrants (competitors) into the market.

    Your simplistic rubric “there is a real electricity market in which buyers and sellers participate on a daily basis” glosses over all these enormous complexities of infrastructure, legislation and the market as an artificial construct. It’s the same sort of logic that would confuse a mechanical duck with a real duck. It walks like a duck and quacks like a duck so it is a duck, at least in the world of TerjeP.

  26. Uncle Milton
    March 7th, 2013 at 09:30 | #26

    @John Quiggin

    Google and it will be on the first page. Readers can judge for themselves.

    The report, incidentally, was co-sponsored by the Consumer Advocacy Panel, whose job it is to agitate for residential users, especially those with low incomes.

  27. Uncle Milton
    March 7th, 2013 at 09:31 | #27

    @Uncle Milton
    That should be google bruce mountain electricity.

  28. Gerard
    March 7th, 2013 at 09:44 | #28

    TerjeP :
    Distribution grids are easentially monopolies. Power stations are not in the same category as grids.

    Part of the problem is that becasue of the structure of the industry, it is broken up the way it is. This made sense when the energy industry was largely coal based (or nuclear, or hydro). More modern technology reflects very different scale and in many instances makes the grid obsolete, or at least forming a very different function.

    The structure of the market, set up both by traditional infrastructure and supported by regulation, prevents entrants with a different approach. An industry that has guaranteed returns and regulation that excludes any major new approaches, with the exception of new power station types on a similar scale to the old ones, doesn’t sound like a real market to me.

    Sensible deregulation phased in over time would see a whole raft of new technology solutions offering energy options generated from a range of scales. This would reflect a real market.

  29. peter
    March 7th, 2013 at 10:28 | #29

    John,

    The paper does a good job of arguing against the bad ideas in favour of privatisation (releasing captial and the like) but it doesn’t really get us any closer to answering the important question, are networks run more efficiently under a private owner than a public owner, and if so, are the gains large enough to overcome the transaction costs of a large asset sale and transition period, rebranding, redundancies etc.

    From what I have seen (mountain and littlechild is a good place to start if you are interested, the productivity commission is also working in this area at the moment), privately owned networks do appear to be run more efficiently. However, much of this analysis is based on the Victorian networks, and as usual with interstate reform, Victorians do most things diferently (AEMO involvement in planning, removal of retail price caps etc) and so it is hard to distinguish the impact of private ownership from other factors.

    From a theoretical perspective, the network regulation process is best thought of as a long term agent-principle problem. Private ownership will provide strong incentives to cut costs, but it will also strengthen the incentives to play regulatory games and reduce service levels. If the efficiency gains appear than privatisation is probably a good thing, but this is an empircial, rather than a theoretical question.

  30. John Quiggin
    March 7th, 2013 at 13:01 | #30

    @peter and also Uncle Milton

    Littlechild is probably the most notable single advocate of privatisation, going back to the Thatcher era (Beesley & Littlechild 1983 is pretty much the founding text), so I’m not going to place a lot of weight on this until I’ve had the chance to look at in detail (ditto the PC). And if Mountain’s work is joint with Littlechild, you can count me as sceptical of Uncle Milton’s view that “Mountain is no right wing ideologue.”

    Of course, my own (opposing) views are well known, so I’m not dismissing this work – just saying that it’s coming from a particular perspective.

  31. iain
    March 7th, 2013 at 17:01 | #31

    The long view should be that distributed energy and local grids are the way of the future, and are more efficient. The issue should be timing of sale of existing assets that do not fit this model, not whether it is right or wrong to do so.

  32. Jim Rose
    March 7th, 2013 at 19:01 | #32

    @Ikonoclast is cable TV a natural monopoly?

  33. paul walter
    March 7th, 2013 at 21:04 | #33

    As a South Australian, I can only that SA Labor is in as deep, deep strife as the preceding Olson Tory government, for its dogged persistence in trying to saddle the public with neoliberal guff, they have been already burnt too often from previous impositions.
    Like true Tories, state ALP governments never forget and never learn.
    That is, unless there is some thing else I’m missing, from behind the wall of funny treaties, foi’s, commercial in confidence, etc ( inadvertantly, of course ) blocking the view.

  34. Jordan
    March 7th, 2013 at 21:32 | #34

    @Jim Rose
    cable TV is not natural monopoly, as a nonesential service you are free not to use it. Providing water, roads, electricity, health… are esential services that you can not easily go without.

  35. Jim Rose
    March 8th, 2013 at 05:41 | #35

    @Jordan essentialness is not a criterion of a natural monoply.

    food is rather important but is not a natural monopoly

  36. Ikonoclast
    March 8th, 2013 at 06:05 | #36

    @Jim Rose

    The cable network maybe but not the content. Generally speaking, natural monopolies seem to be physical infrastructure networks and grids which are inefficient to duplicate. But the other part of it is very high capital costs and very large installations for new entrants relative to the total market size.

    It is correct that essentialness is not a criterion of natural monopoly but essential services which are also natural monopolies tend to be strategic services for a nation in the social, economic and military senses. To allow the “capture” of strategic services by a capitalist corporation or corporations, foreign or domestic, is to lose a portion of strategic and planning control of the nation. If the nation is a democracy, a loss of governance control in this manner is equivalent to the loss of a portion of democratic control.

  37. March 8th, 2013 at 06:13 | #37

    Fatal bushfire SPI Electricity’s fault, Vic court told

    Carol Matthews wept in the Victorian Supreme Court on Monday as she watched footage of the firestorm that swept through St Andrews and claimed the life of her 22-year-old son on February 7, 2009.

    She is leading a class action of more than 10,000 members, suing electricity provider SPI Electricity for compensation, alleging its negligence in failing to maintain power lines sparked the Kilmore East blaze that killed 119 people and destroyed 1242 homes.

    (Please remove above two posts with their erroneous content, Professor Quiggin)

  38. Ikonoclast
    March 8th, 2013 at 06:41 | #38

    @malthusista

    That raises a number of issues. I am an vehement opponent of natural monopoly privatisations and essential and social service privatisations as is obvious from my posts. But even I shy away from holding individuals and corporations responsible and legally liable for natural disasters with complex major and multiple contributing causes.

    As I understand it, an allegedly poorly maintained power pole was struck by lightning and dropped its cable. I suspect that the power of most ground strike lightning bolts is such that the condition of the pole may be a minor factor relative to the power of the lightning strike. A brand new pole and cable attachments could still easily fail in this manner to a lightning strike. Given that the lightning strike will ground through the pole (or along its surface) a reasonable alternative theory would be that the lightning strike itself started the fire.

    Without detailed observations of the actual event there is no scientific way of reliably determining the precise causes of pole failure and of ignition. Will the court attempt to determine matters on the balance of probability? The probabilities cannot be estimated better than 50-50.

  39. Ikonoclast
    March 8th, 2013 at 06:50 | #39

    My mistake. It appears the lightning strike is alledged by SP Net and not concurrent with the power line failure. That would change matters considerably.

  40. jrkrideau
    March 8th, 2013 at 07:18 | #40

    @TerjeP
    Seems a reasonable summary to me from the Canadian perspective. A civil servant is expected to give the best advice possible to his or her minister and to then shut up and soldier on if the idiot decides to do something stupid. Publicly contradicting one’s minister is a definite no-no .

    In extreme cases, as Peter Smith suggests, one resigns.
    See http://www.cbc.ca/news/canada/story/2010/07/21/statistics-canada-quits.html for an extreme example .

  41. March 8th, 2013 at 08:19 | #41

    Ikonoclast :
    My mistake. …

    ?

    If so, then it’s our mistake.

    The case against privatisation does not hang or fall on whether or not negligence driven by the private profiteers was the cause of this bushfire. There can be no doubt that any comprehensive study would conclusively show that privatisation, together with the loss of accountability and, in almost every case, transparency, increases hazards to members of the public and the natural environment.

  42. Ikonoclast
    March 8th, 2013 at 08:58 | #42

    @malthusista

    Yes, the culpability or otherwise with respect to this one incident does not alter the general principles. Privatisation of natural monopoly infrastructure and strategic infrastructure (these being overlapping sets, not identical sets) leads to all of the following problems;

    (a) loss of social income, equity and wealth in common;
    (b) concentration of wealth in few hands (corollary of point a);
    (c) loss of accountability;
    (d) loss of transparency;
    (e) loss of regulative control;
    (f) increased risks to the public (corollary of c, d and e)
    (g) creeping loss of strategic control of all aspects of national governence; and
    (h) in a democracy point g is equivalent to a creeping loss of democratic control and its replacement by corporate and oligarchic control.

  43. Julie Thomas
    March 8th, 2013 at 09:11 | #43

    The power poles up here on the Darling Downs with the famous ’30 ft deep’ black soil, fall over very easily so there would be different costs for maintaining infrastructure. When a pole begins to lean precariously, people who notice and care, tend to let them know, for free.

    Privatisation will lead to call out times in our area ‘quadrupling’ – that is, according to our local member Ray Hopper, who writes “Ray’s Rounds”, a column for the local newsletter – pick it up free at the post office when I pick up my mail.

    Ray who has always been against privatisation it seems, but I never noticed that, says that depots with less than 15 members will be closed and so instead of travelling 50 klms, call out crews will have to travel up to 500 klms. Then the hypocritical goose ponders, “what will happen in storm seasons?” and laments that “if this sell-off happens, we will see pensioners freeze in winter, industry crippled and primary producers unable to justify the cost of irrigation”.

    Ray didn’t speculate on how privatisation and the profit motive would impact the maintainence requirements, perhaps next week he will do that.

  44. John Smith
    March 8th, 2013 at 10:34 | #44

    Officials such as a Treasury should
    1. advise the minister honestly on the merits of policy options
    2. carry out the policy the minister decides on
    3.if asked (for example at parliamentary committee hearing), describe what they are doing to carry out the minister’s policy
    4. If asked to comment on the merits or demerits of the policy, or the advice they gave, refer such questions to the minister.

    It’s for the minister to justify the minister’s decision. That’s why ministers have advisers and press offices. Officials’ job is to administer the policy. They have no obligation to act as cheerleaders for the minister.

    This is the ideal. In practice some awkwardness can arise when honest officials are conspicuously silent when invited to explain the merits of what is actually a bad policy.

    In my experience in the Commonwealth officials have been reasonably conscientious in maintaining these distinctions. As a token of this, you will usually find that a Commonwealth department’s website is clearly separate from the minister’s website. Statements with any political colour are on the minister’s site; the department’s statements relate to the administrative details.

    I do not have the feeling that these distinctions are maintained so conscientiously at State level. Often *departmental* senior officials are reported saying things of a cheerleading nature that would more appropriately come from the minister’s office.

    Honest public servants do not tailor their initial advice according to what they think the minister will want to hear. On the other, hand, they do carry out the minister’s decision even if they personally disagree with it. If you can’t handle that, you’re in the wrong job.

  45. John Smith
    March 8th, 2013 at 10:40 | #45

    John Smith #43

    ‘Honest public servants …. carry out the minister’s decision even if they personally disagree with it.’

    – Providing it’s legal etc etc. I’m not here talking about corruption & whistle blowing situations.

  46. may
    March 8th, 2013 at 16:11 | #46

    Ikonoclast :@malthusista
    Yes, the culpability or otherwise with respect to this one incident does not alter the general principles. Privatisation of natural monopoly infrastructure and strategic infrastructure (these being overlapping sets, not identical sets) leads to all of the following problems;
    (a) loss of social income, equity and wealth in common;(b) concentration of wealth in few hands (corollary of point a);(c) loss of accountability;(d) loss of transparency;(e) loss of regulative control;(f) increased risks to the public (corollary of c, d and e)(g) creeping loss of strategic control of all aspects of national governence; and(h) in a democracy point g is equivalent to a creeping loss of democratic control and its replacement by corporate and oligarchic control.

    Icono you left out neglect of maintainance.

    a behavior of the conservative/profits first world, seen here in the west as soon as the govt gained power by 64 votes.
    when they came in the trains were running like a song,now the rattling doors emphasise the deterioration.
    the Vic court decision underlines this reality.

  47. may
    March 8th, 2013 at 16:41 | #47

    oh and in todays fin?
    costellos’ post politics business closed in Qld–can’t make money.

  48. Peter T
    March 8th, 2013 at 17:20 | #48

    former public servant here. Public servants advise ministers, who are the responsible parties. In my experience, most of them are quite prepared to give unwelcome advice. But in public they are expected to defend the minister’s decision (and cabinet policy), however little they agree with it. And Treasury is likewise bound to find what reasons it can to justify the government’s decision – whatever it’s internal misgivings. It’s part of the job, because under Westminster, the minister carries the can.

    There are public servants who, by statute, are required to make decisions independently of government direction, and who are then free to make their own cases to the public (the DPP is one example; the Tax Office in relation to particular cases is another).

  49. rog
    March 8th, 2013 at 22:49 | #49

    @may Costello has few fans in business.

  50. sunshine
    March 9th, 2013 at 07:20 | #50

    an interesting discussion , not something i know much about – but sounds like a good idea to have natural monopolies in state hands – and maybe industries of strategic importance too. (does that sound xenophobic ? maybe a small dose of xen is healthy)

    abbot getting ready too sack public service heads .

    the consensus on catallaxy seems to be that ted baileiu is a communist !

  51. may
    March 9th, 2013 at 12:45 | #51

    @sunshine

    red ted?

  52. Jim Rose
    March 10th, 2013 at 09:57 | #52

    Ikonoclast :
    @malthusista
    Privatisation of natural monopoly infrastructure and strategic infrastructure (these being overlapping sets, not identical sets) leads to all of the following problems;
    (a) loss of social income, equity and wealth in common;
    (b) concentration of wealth in few hands (corollary of point a);
    (c) loss of accountability;
    (d) loss of transparency;
    (e) loss of regulative control;
    (f) increased risks to the public (corollary of c, d and e)
    (g) creeping loss of strategic control of all aspects of national governence; and
    (h) in a democracy point g is equivalent to a creeping loss of democratic control and its replacement by corporate and oligarchic control.

    a) Increase in revenue from sale, with the sale price equalling net present value of expected dividends, efficiency gains and any monopoly rents
    (b) Concentration of wealth in many hands because the majority of share market is owned by superannuation funds and other vehicles of pension fund socialism
    (c) Increased accountability through threat of bankruptcy and takeover
    (d) Increase in transparency because of the daily share price encapsulates the fortunes of the company
    (e) Increased regulative control because of not conflict between government as owners and dividend recipient and government as regulator
    (f) Reduced risks to the public because enterprise is run on the basis of private profits AND private losses and no more bailouts
    (g) Increased strategic control of all aspects of national governance because of less conflict between commercial ownership interests and public interest
    (h) In a democracy point g is equivalent to greater democratic control replacing bureaucratic control with public accountability

    • Do you dispute that the annual rate of return on the portfolio of New Zealand’s state owned enterprises was zero in 1984?
    • Do you dispute that the NZ government is bailing-out the state owned mining company
    • Do you dispute that the book value of Kiwi rail was written down from about $600, the purchase price, to $1.

    If the annual rate of return on the portfolio of New Zealand’s state owned enterprises was zero in 1984, and is still below the long-term government bond rate, the revenues from any privatisations were windfalls.

  53. Jim Rose
    March 10th, 2013 at 09:59 | #53

    Ikonoclast :
    Privatisation of natural monopoly infrastructure and strategic infrastructure (these being overlapping sets, not identical sets) leads to all of the following problems;
    (a) loss of social income, equity and wealth in common;
    (b) concentration of wealth in few hands (corollary of point a);
    (c) loss of accountability;
    (d) loss of transparency;
    (e) loss of regulative control;
    (f) increased risks to the public (corollary of c, d and e)
    (g) creeping loss of strategic control of all aspects of national governence; and
    (h) in a democracy point g is equivalent to a creeping loss of democratic control and its replacement by corporate and oligarchic control.

    a) Increase in revenue from sale, with the sale price equalling net present value of expected dividends, efficiency gains and any monopoly rents
    (b) Concentration of wealth in many hands because the majority of share market is owned by superannuation funds and other vehicles of pension fund socialism
    (c) Increased accountability through threat of bankruptcy and takeover
    (d) Increase in transparency because of the daily share price encapsulates the fortunes of the company
    (e) Increased regulative control because of not conflict between government as owners and dividend recipient and government as regulator
    (f) Reduced risks to the public because enterprise is run on the basis of private profits AND private losses and no more bailouts
    (g) Increased strategic control of all aspects of national governance because of less conflict between commercial ownership interests and public interest
    (h) In a democracy point g is equivalent to greater democratic control replacing bureaucratic control with public accountability

    • Do you dispute that the annual rate of return on the portfolio of New Zealand’s state owned enterprises was zero in 1984?
    • Do you dispute that the NZ government is bailing-out the state owned mining company
    • Do you dispute that the book value of Kiwi rail was written down from about $600, the purchase price, to $1.

    If the annual rate of return on the portfolio of New Zealand’s state owned enterprises was zero in 1984, and is still below the long-term government bond rate, the revenues from any privatisations were windfalls.

    note: re-post of post in moderation because of hyperlinks

  54. March 11th, 2013 at 02:55 | #54

    Privatisation of Queensland Electricity Assets: A Preliminary Evaluation

    The report by past Federal Treasurer Peter Costello of his supposedly independent investigation into Queensland State finances on behalf of the Queensland Government Commission of Audit recommended the full privatisation of Queensland Government’s electricity generators. Only last year, the Queensland public, outraged at the asset fire sale embarked upon by former Premier Anna Bligh without any electoral mandate whatsoever from the 2009 state elections, savagely punished Labor at the ballot box leaving only 7 sitting Labor members in a house of 89.

    That, less than a year after, the new Government of Campbell Newman has contrived an excuse to continue with policies, that have been so resoundingly repudiated by Queenslanders, provoked outrage. An example of the outrage felt is a new opinion poll taken by news.com, which shows that Qld privatisation [is] opposed by 85%: poll.

    Professor John Quiggin of the University of Queensland responded on 6 March with a post on his web site. That post included a link to a pdf report which, by examining the disastrous history of privatisation across Australia in recent decades, comprehensively demolishes the case for any privatisation.

    In fact, much of the ground covered by Professor Quiggin has also been covered by candobetter.net and, before that, the site citizensagainstsellingtelstra.net. I realised that Professor Quiggin’s pdf document could be made so much more useful if it were reformatted from pdf into html so that it could be directly linked to other material on the Internet which is also against privatisation, particularly on candobetter.net. This document is the result of that work.

  55. Jim Rose
    March 13th, 2013 at 18:42 | #55

    should an incoming labor government buy back the privatised assets?a good deal?

Comments are closed.