Failures of privatisation

The news that National Express, the main provider of privatised public transport services in Victoria is to walk away from its contract with two weeks notice follows a similar pullout in South Australia by bankrupt electricity generator NRG only a week ago. In both cases, Labor governments have been left to pick up the tab for deals done by their Liberal predecessors. This may help to wean them off the bipartisan assumption that privatisation is the best way to deal with government services.

More significantly, these episodes underline the point that, for essential services, government is the provider of last resort. It can sell the assets, and forgo the associated earnings, but it can’t divest itself of the obligation to step in (and pay up) when something goes badly wrong.