The Bligh government’s case for asset sales rests in part on a supposed fiscal emergency arising from the global financial crisis and in part from the general ideological claim that putting infrastructure assets into the hands of the private sector will promote economic efficiency. Both parts of the case have taken a knock in the last couple of days. A study by Access Economics confirms the findings of the union-commissioned study by Bob Walker and Betty Con Walker (derided by the government and state Treasury at the time) that the budget position is much stronger than has been admitted so far.
On the second point, Liberal Lord Mayor of Brisbane Campbell Newman has conceded that the days of private toll roads are probably over. As I’ve been saying for years (getting on for decades now) these projects always involve a social loss. In the 1990s, it was almost always the public that took the loss while private operators made out like bandits. In the easy money environment of the 2000s, private investors made silly investments, and often lost the lot. Now that everyone has wised up, there will be no more deals like this.
By far the best solution would be for the state government to buy back all the toll roads, and replace ad hoc tolls with a coherent system of congestion pricing. The Bligh government instead, plans to sell off its own toll roads. As for congestion pricing, Anna Bligh has made her view pretty clear “not while this government is in office”. In reply to which I can only quote Men in Black – “Your offer is acceptable”.
H/Ts Darren Godwell, Tom Miller, Nancy Wallace
John Quiggin 
You can have my congestion when you pry it from my cold stiff sinuses.
I agree emphatically John.
Roads should never be priced to recover their costs. If a road is uncongested then adding an extra driver adds nothing to social costs so that, from an efficiency perspective, the roads should be unpriced. Their funding should be based on tax revenues. Dupuis pointed this out more than 100 years ago and the nits like Anna Bligh and John Brumby should learn. If roads are congested – in many situations they need to be to reflect capital cost – travel time tradeoffs, then they should be subject to congestion charges equal to the marginal congestion cost. If road services display constant returns to scale then this will recover the costs of the road by well-known theorems in traffic economics. If a monopolist is put in charge of a road they will charge excessive tolls from the viewpoint of managing congestion – Eastlink and Citylink in Melbourne charge tolls when there is no congestion.
The best procedure is to get the private sector to build roads but to leave their management to government – tolls should be set to cover external costs such as congestion (but also vehicle damage costs) not to recoup costs. If roads earn npure profits on this basis they should be expanded.
@hc
I disagree. I’d like to see a charge on every vehicle for every unit of distance driven on a public road.
Pricing variables would include
a) congestion
b) tare
c) emissions
d) driver skill
e) driver compliance
f) availability of public transport parallel to route(s)
In such circumstances, registration, CTP, automotive stamp duty and fuel excise could be abolished
I’d also like real time infringement notices, biometric based ID and in vehicle alcohol testing at start up.
Maybe we should be putting more effort into getting cars to drive themselves, as we don’t seem to be very good at doing it ourselves. Of course cars need not be fully autonomous to reduce conjestion. A system that allowed cars to automatically and safely match the acceleration and deacceleration of the car in front would hould be very helpful. Mind you, we’d probably have to limit how close these cars can get to the vehicle in front at first to stop people freaking out about being tailgated. This sort of system is something that technology can handle pretty well now and various companies are mucking around with this concept.
I emphatically agree, John, that we should be thinking of the need to reduce emissions and traffic congestion, not trying to figure out how our business mates can make money out of unsustainable and needless economic activity.
Thankfully, a small contingent of economists like yourself and the Walkers have been differentiating themselves from the Harvard sheep for a number of years, pointing to the fact that privatisation is nonsense – the maths does not add up and the social/environmental consequences are un-calculated, uncontrolled and likely to be negative and costly.
Premier Anna Bligh is obsessed with growth, with recruiting Sydney residents to flood into Brisbane and with the privatisation of infrastructure with ideological zeal. Similarly, Campbell Newman will probably go down in history as the most expensive mistake the people of Brisbane ever made. It is revealing indeed that Anna Bligh will not countenance congestion pricing on the roads, as she is unconcerned with social or environmental consequences.
When Brisbane is concreted over with all the most obsolete infrastructure (designed for the private motor vehicle – not public transport), all in private hands, the city will be extremely vulnerable to the forces of global warming and peak oil. What does it take, short of Dr House and his defibrillators, to wake the disengaged Brisbane electorate, who have been had, big time?
That outstanding economist, Dr John Hewson wants congestion pricing in Sydney.
That way use of the road will go to the ‘highest value user’ and he will be able to drive his merc or rolls or four wheeled tank or whatever, on the road, unmolested by those who really don’t value the experience at all. You know, that lower class of person who has simply chosen not to be born to wealthy parents, or chosen not to otherwise obtain a mint of money, and instead has chosen a life of poverty, or bludging or, shame, working for a living.
As to if the road networks ownership should be in public or private ownership is in the final analysis an irrelevant question IF IT WORKS. But the problem the community suffer is that both forms of ownership bring the unhelpful bias of the operators. Private operators only want those high-demand highway links that will generate good profits, free of any responsibility for the impact on the network as a whole, with the funding black-hole of all those loss-generating tedious back-streets. Public operators are too beholden to the shorter ballot-box outlook and noise interest group. Such that they will never make elector-ally unpopular but wise management initiative like (as badly conceived as it is) congestion pricing.
Unfortunately congestion pricing is just a way for the rich to price the poor off the roads. The more just solution is privatize the congestion and leave the network in the public ownership see Razoos ;_ http://www.auzgnosis.com/greens/razoos.htm
@W.Shawn Gray
Interesting and perhaps workable but … this sounds a lot like cap and trade … I also don’t see how it avoids the problem of rich people pricing poor people off the road. It might be that the price to achieve that might be higher than some other system, but this is how it would work.
I’m not even sure, for the record that a system in which poor people have less direct access to road space is inherently inequitable. Relatively disadvantaged people represent most of the traffic. They are most often injured or involved in injuring others. Getting them onto quality public transport would greatly improve their safety and if they get a suitable transfer payment in cash or kind, be equitable. Since motor vehicle exhaust damages both people and property, and most people are on the wrong side of the pareto line and most of those harmed the least are on the right side of it, then again, the measure is equitable.
It also means that there is less political pressure to pressure to build new roads or have urban sprawl, and this too tends to be equitable, since those on the margins of the big cities tend to be near the bottom of social advantage.
So despite the negative and visceral quality of the idea of the rich pricing the poor off the roads, it may be as well that they do so, provided they pay the right price in cash and kind.
“By far the best solution would be for the state government to buy back all the toll roads, and replace ad hoc tolls with a coherent system of congestion pricing.”
Not that I live in Queensland, but if I did, I’d wait eagerly for the second one of these to occur on roads that are already public that need it before getting the government in on the first (I assume the same arguments apply in other states). It seems to me this is the real problem with the suggestion — everyone simply wants roads at no direct cost to themselves, and no governments have the guts to actually implement decent congestion schemes, so all that happens is that governments pour money into roads which end up as competition against other forms of transport that might actually solve some of the transport problems.
Here’s the Access Economics report:
Click to access AE-SEQ%20Council%20of%20Mayors%20economic%20analysis%2026%20March%202010%20%283%29.pdf
From page iii:
“The news on population in recent years has been good – birth rates have lifted, and migration has too. Indeed, were it not for the supply side constraints bedevilling the State’s housing construction sector, Queensland’s current population growth could have been higher still.”
Given that a lot of Queensland’s problems appear to derive from the influx of a thousand people per week, with the resulting strain on infrastructure, this sounds detached from reality. Apparently the state will do well, because more people are arriving than it can support, so the economy will just *have* to grow.
Honestly, the government should not be in the business of service delivery. It should simply provide a facilitative framework for industry with regulation where needed. As a result, privatisation is a logical step to make an orderly transition from public to private ownership.
@Rationalist
Err Rationalist, Honestly! The government should not be in the business of government. This function should simply be outsourced, with the ‘government’ franchise being periodically re-put to tender. Fully privatised defense forces, police, judiciary, taxation and revenue collection, they could all be done so much better by the more efficient and ever more reliable private sector. Indeed, why stop there? The senate and house of reps could also do with a bout of privatisation. And the stupid impediment on so called bribery and corruption should be done away with. Bribery and corruption are simply another efficient market mechanism by which resources are allocated to the highest value users, and therefore, their best uses.
More steering less rowing. You can never have enough steering.
@Rationalist
Well if roads and transport (and ports) arent part of a “facilitative framework for industry” and as such something the government should provide according to Rationalist’s definition above, then Im the Queen of England again.
I don’t see why a system of congestion charges would require state governments to buy back toll roads. If the agreed toll on a particular road is too low (relative to the marginal cost of imposed by the road user) the government could levy an additional charge on top. If it is too high, the road user could get a rebate.
@Fran Barlow
Fran – you say
“Relatively disadvantaged people represent most of the traffic. They are most often injured or involved in injuring others. Getting them onto quality public transport would greatly improve their safety and if they get a suitable transfer payment in cash or kind, be equitable.”
As soon as this is done Fran..the privatisation egos will be looking for a sell off and it wont be “quality public transport” they get either. The mindset now in governments is “how can we not provide the service.” Thats what we are all up against, not just the disadvantaged (but they still want our taxes to fund their benefits).
@Alice
Alice … if you excise the swing at privatisation, your general tenor here [“they still want our taxes to fund their benefits”] would sit well with Abbott, the US right …
Your position approaches a metaphysical account of government. The “privatisation egos”? Who are “they” in “it wont be “quality public transport” they get either”?
Hmmm …
@Fran Barlow
Fran – you advocate removing the poor and the disadvantaged from our “privatised” roads in the interest of what? whom? – what on earth do you expect by way of response?
Hmmm…..
Your suggestion of removing “the majority of traficc, by removing the raltively disadvantaged (who by your account represent most of the traffic) means effectively removing the majority from road use.
This idea is so ill thought out I cant believe it. How do you propose to measure people’s right to choose to drive…an income and assets test on road use or would that be tolls so prohibitive they cant get to work? Who Fran will build your wonderful public transport option and who’s taxes will maintain existing roads for the passage of mercedes and BMW’s only?
Yet more inequality to fix the traffic? Cant afford road use to get a job? Tough luck. What about Sydney’s great urban sprawl Fran – are you suuggesting a bus will travel down every street and connect to a great extended rail system to get people to work – or perhaps you suggest they do without work if they cant afford to travel or are unable walk great distances to a public transport node.
Reality check needed.
@Winton Bates
Congestion taxes would reduce the numbers of vehicles on roads including roads feeding into toll roads. They would have a material impact on toll road revenue. Some compensation for the toll roads would probably be required either because their contract with the government might require it or they might have a case for compensation at law. Given that requirement and the costs of negotiating a ‘fair’ amount of compensation and the risk of over compensating, the efficient solution for government might be simply to buy them out before implementing congestion taxes. Of course, this would vary case by case and would require careful analysis in each case.
“The mindset now in governments is “how can we not provide the service.””
There’s a good reason for that, and it’s probably pretty obvious to many people that live in either NSW or VIC.
Politicians love privatisation because once an entity is privatised, instead of copping any blame for poor performance or poor service provision, they can evade blame and even join in the chorus and make futile attempts to improve things. This maybe why they have embraced the ‘free market’ privatisation nonsense so whole heartedly.
You can’t have a blame game unless you introduce someone else to blame.
@Alice
It for their own good Alice. Traveling by private transport is far too good form them. It might give them the incentive to become wealthy highly productive members of society providing essential services in the finance industry, that is, like John Hewson.
Actually reading above hurts, almost got off a post last night before”losing”the thing.
Welcome back, “Gloriana”!
A combination of yourself and “metaphysics” (John Donne, anyone?) from elsewhere, now has me in a thoroughly “Renaissance frame of mind. I agree with your comment about equity. Had me in mind of a loose analogy with the situation of the woman on teev, at the current demos in Greece, wailing that they now expected the workers to pay enmasse with their jobs and futures, for flawed and delusionist policies imposed from above.
Likewise the public in the big states have to wear it for the stuff ups of “captured”neolib government and ideology.
Fran is dead right about clearing traffic from choked transport arteries, for sustanability in the future if nothing else. at bottom cars are just a consumer fetish also. But is is a very “neolib” way to go, isn’t it Fran?
Because, how do folk in the outer suburbs use flaky or non extant public transport with the public transport system itself ruined over the last generation, as (at least unconscious) policy, as Mar’n and his friends do today with coal and uranium versus alternative energy; also carperbaggers like MacBank hopping into taxpayer largesse for dodgy tunnel projects and the like?
@Freelander
They would have no case at all for compensation. It is settled law that one government cannot bind its successors, though as a matter of practice, states think the downside of playing fast and loose is too big a price to bear.
Even so, a general policy of road use charging would not be something which would be contractually excluded, and so even if failing to charge for tollway usage were excluded access to it from all the feed roads would render the point moot.
@Alice
No … just charge everyone according the schedule above and let them figure it out.
It would be exactly as now, with the difference that the roads would need less maintenance since trhey would carry a lot less traffic. We would of course have the funds to maintain them AND also expand public transport in areas of apparent need. We could rezone and build more housing closer to the main areas people were driving. People would probably respond by wanting to live closer to work. A lot of cars would be sold or not bought and eventually a new equilibrium would be found based on much less intensive use of road space and private motor vehicles. There would be more car pooling and small possibly electric) shuttle buses run commercially would become viable.
@paul walter
I don’t care about the labels. I’m keen on what would work. Market forces are useful in rationing retail-style goods — and transport is retail.
@Fran Barlow
It may be settled law that one government cannot bind another but is it settled law that another government can unilateral repudiate a contract without compensation? If it were why bother contracting with government. Also, is it settled law that you cannot sue the government?
No Fran , you are making the victims pay twice for the errors of their natural enemies in power.
“Market forces’ could be useful, true; the Australian”market” has certainly turned up its collective nose at being “sold” damaged refugees and wanting high immigration to further clogg up an already malfunctioning Australian systemm for example.
Do you think this instance of a working example of “market forces” at work, as “useful”?
Ah. Here we are next morning, just noticing Shanahan catalepting over a possible$ 5 billion tax on big mining.
If only he felt as exercised at the thought of the poor in Australia, let alone the billion starving in the real world, on a dollar a
day or less.
@Freelander
There can be absolutely no doubt that the state can unilaterally set aside contracts. They choose not to precisely for the reason you cite — and because the fact that they are certain to meet their obligations means they get a better deal on loans and on terms — or they could. This gives them an enormously good position from which to bargain.
@paul walter
You will need to explain how refugees are germane to road charging policy and how the poor pay twice if there is a system of use-based charging for road access.
Aahhh.
You reckon…
mmmmmmmmmmmmmmm..
And here was I about to offer a generous salutation for the coming autumn day
Please Fran, not this time of morning, eh?
Tell you what.
If its 1500 words or less, can I have an extension to next Friday?
@paul walter
Take as long as you deem necessary … in the interim though, the comment gets an asterisk and a comment note: “undefined value” … [/end programming metaphor]
Lets have just another example of the neolib “charging” mindset that has infected government. Out last night with a public sector friend who thinks its a great idea that the government is spending our taxes building retirement apartments that only the rich can afford to live in at $1000 plus a week.
Now the justification of course is that “if the government uses our taxes to do this it will..at some undefined future point have more money to spend on the poor, who cant afford to retire to these places, and instead are “clogging public hospital beds”.
I suppose by your logic Fran …we should really consider kicking the poor and the relatively disadvantaged out of their hospital beds as well?
Oh yes…tough love…nothing quite like it. What gets me is that some here dont see any of the insanity of the government using the taxes of the poor and disadvantaged and everyone else to build retirement homes for the rich?
I really feel like Alice….in upside down land.
@Alice
You seem keen to take a swing, Alice but short of a specification of the revenue flows for your modelling, it’s hard to conclude much at all about your public sector friend’s proposal.
If the proposal involves a transfer payment to the wealthy, then of course, it would be inequitable.
The broader question you should consider Alice is this — what is the most efficient way to build deploy the resources we have to meet the needs of the majority of the citizenry? Some utilities are most efficiently built and deployed from pooled funds and some from individual or private funds. Deciding where that line should be drawn is where debate over public policy begins.
My own predisposition favours community provision for what may be called infrastructure and private provision for what may be called lifestyle. At the margins of each, I think we can negotiate to ensure equity where it is relevant, but this involves specific modelling, evidence and a means of mapping this to a maintainable and transparent system. Simply repeating heartfelt shibboleths as you do contributes nothing of substance.
For the record, I have no desire to “kick” anyone out of their hospital bed, though it is hard to imagine why someone who would be better served by some other arrangement ought to be in a hospital bed. I’d prefer they were well provided for enough not to get there in the first place.
@Fran Barlow
Anyone can break a contract. I recognise that a government can break a contract. What you claim is that a government can break a contract without having to pay the penalty specified in the contract or set by the court. Are you sure of this or are you simply speculating? Are you a lawyer with the requisite knowledge in this area?
@Freelander
I studied law at undergraduate level, including of course, the old standard torts and contracts through the SAB course. I also did consitutional law buoth at Sydney Uni under Morrison and again as part of the SAB course.
The State of NSW (like every other state) has original sovereignty. It can, subject to the purview of the Commonwealth acting within its power and sundy provisions of the Australian Constitution, make any laws it wishes that meet the test of being “for the good government of NSW”. There are no exclusions outside of Commonwealth power, specific matters inter se and possibly any restriction implicit in the Letters Patent.
If the law aims to deal with some entity trading in or otherwise connected with NSW (or the relevant state) it is capable of being enacted. Setting aside contract provisions falls well within the scope of such power.
oops … I also did constitutional law both […] and sundry provisions
How untidy! Mea Culpa
@Fran Barlow
Fran – you say ” I think we can negotiate to ensure equity where it is relevant, but this involves specific modelling, evidence and a means of mapping this to a maintainable and transparent system.”
I think this sort of statement more resembles a shibboleth – (some may call it jargon). Thanks to FOI laws and “commercial in confidence” provisions – there are many government activities now that are completely hidden and “transparency” means very little. Perhaps start with the law itself if you want transparency in government processes.
I am taking a swing Fran – not at you but at the meaningless terms and expressions that governments now use to justify their involvement in profit seeking activities purely for the profit motive, not to support or facilitate private enterprise, or to provide public services and manage them, but to openly compete with and against the private sector.
@Alice
.
So your problem is with the government making things hard for business? I’m having trouble keeping up with whether you are on the side of public provision of services or the corporate sector.
Governments that make “profits” on trading take private money and make it public. That surely means that the community has more funds to spend on good programs? All else being equal this is better than the other way about, surely. Unless you think private investment is by definition preferable to public investment, I wonder why you would make this claim.
When we are examining public policy, those of us who count ourselves as supporters of social justice will want to know
a) does the program reduce inequity more effectively and efficiently than any other conceivable program?
b) does the program assist those at the greatest disadvantage?
c) does the program improve productivity?
d) does the program meet reasonable sustainability tests?
e) is the program maintainable and capable of adequate audit?
f) does the program allow low cost upgrade and variation in the event that aspects of the program produce unanticipated negative externalities or foreseeable changes in demographics demand it?
Programs that meet these tests are rational, whatever jargon or slogans proponents or detractors use to describe them .
@Fran Barlow
I have a problem with the government making things hard for business and I have a problem with the loss of public ideals in the public sector Fran.
I do indeed.
@Fran Barlow
The issue isn’t whether it can break a contract, the issue is whether it can break a contract without a court being able, if it decides appropriate to make it provide compensation. You haven’t addressed this which is the issue.
Anyway, you have already back tracked by admitting that if it is in the contract that they would have to pay compensation they would because if they didn’t why would anyone contract with government.
Fran @ 3
Your wish has already been granted. Fuel excise taxes perform most items on your list, except breath testing. Fuel consumption is directly proportional to distance and speed travelled. When there is congestion vehicles slow down and use more fuel for the same distance travelled paying more tax in the process. That was easy.
But, Fran, I doubt that many people want to live in a world as nitpicky as your list would entail stacked on top of the many other lists that you create from time to time.
@Freelander
A minor aside – has anyone examined the costs to governments lately of contracting with the private sector and compared accounting and legal and financial costs to govt relative to twenty years ago (percentage of budgets?) – aside from contingent liabilities there are accounting and audit costs and tender preparation costs and horror of horror all those nasty legal costs billed in 5 min blocks at $100s per hour – accountants and auditors not far behind lawyers these days and we know about financial advisers.
It would be interesting to compare the costs of services directly publicly provided but of course that is off radar when many public depts now have a somewhat difficult to shift focus on modelling so called “sustainable” privatisation.
Whether it is actually “sustainable” or “productivity improving” or “maintainable” or “visionary” or “globally strategic” or whatever bla bla …outside the model, appears to matter very little…..well not enough to question the model, anyway. In part I blame the productivity commission under JH – its still hanging around.
and I love this quote below… so Ill link the whole piece
“It (..the Productivity Commission) was a senior partner in the promotion of the free market. We shouldn’t hand it another cut-throat policy razor to play with.”
http://www.smh.com.au/opinion/blogs/the-economic-brumby/the-last-refuge-of-scoundrels/20100407-rq75.html
Alice…….
………don’t be so silly, please. Any one-industry economy must strive to find persuits for the non industry involved population. If we start to micro examine how this…..this….um…income distribution ..er method works, then our whole mineral exploitaion economy could collapse. The last thing that we need post global financial collapse, and pre election, is people questioning their existence.
Particularly mine.
You have to realise that every income in Australia hangs precariously balanced, mobile fashion, from that one industry thread. When we had more threads, agriculture/ manufacturing/innovation/etc, and everything was cross reinforced it was right to hack away rotten the threads. Not now.
@BilB
No they don’t, as evidenced by the current congestion and the debate over charging for it.
They take no account of driver skill, or whether parallel public transport is available and only peripheral account of tare. Even a zero carbon vehicle (if one could have one) damages roads, increases the prospect of collision and holds up others.
We want to target the right things and fuel excise is too blunt an instrument.
@Freelander
The courts only serve the law of the land. If the state declares a contract provision void or a whole class of contracts void, then the court must take account of it.
As I said though, that would be a radical step, which the state would not take for reasons you and I have noted.
You have a point with electric vehicles, but as for the rest. Driver skill is highly subjective, daily variable, and descriminatory if personal performance became negatively taxable. Excise revenues have been ensconced into general tax revenue and no longer relate to their original justification, just as would happen with what you are proposing.
_________________________
The original impetus for privatisation came from a fad of thinking that went “governments have no place in business, they should regulate, while business should manage”, and obtained its strongest support from investment funds such as insurance companies and marchant bankers who were in need of stable, high profit, low effort, perpetual investments. Electricity, water, air. Anything that people cannot live without. “And why shouldn’t they make a high profit from essential needs? after all, the profits are returned to the public in the form of retirement income “. What is wrong with that is that it is 50 years before those who need the most of those commodities, families, get any benefit if they ever do. And the investment funds were soon not happy, either because these essential commodities were not very “exciting” (read profitable) so they sought ever higher returns in new and imaginatively complex ways. And that lead to global financial meltdown, which now falls on the public to put right, again.
The argument that the public cannot use their “body corporate” to do community works for the common good always was a “crock”.
@BilB
On the contrary, you could have skills acquired in properly conducted tests and regular tests at the completion of drive training programs by audited providers. This would measure not merelty defensive driving skills but reaction times and so forth. Compliance with road laws would also be a factor.
Moreover, there is no exact correlation between vehicle tare and fuel usage, and it is even worse if someone puts 4 people in their car. This is something you would want people to do, yet you’d be taxing them extra for it.