The sale of state assets will always be unpopular with some sections of the community.
The sale of state assets will always be unpopular with some sections of the community.
Colin Barnett is clearly serious about the need for the privatisation of some government activities, given the formation of a high-powered task force to recommend sales options.
One of Mr Barnett’s most trusted advisers – director general of the Department of Premier and Cabinet, Peter Conran – and under-treasurer Tim Marney head up the task force, which is to report on the options available to the government in the lead up to the state budget in May.
It’s a significant challenge, given the sensitivities associated with the sale of public assets, the mixed experience of previous sales, the pressure from the ratings agencies to strengthen the state’s balance sheet, and the fact that the opposition and unions will almost certainly oppose any sell-offs.
Treasurer Troy Buswell may not have been in politics during the last major asset sales in the mid 1990s, but Mr Barnett was; so he is well aware of the pitfalls associated with such moves.
Among the government enterprises to go to market during Richard Court’s premiership were Bankwest, AlintaGas, the Dampier to Bunbury gas pipeline, and Westrail freight. They certainly raised a lot of money to help the cash-strapped government, but the businesses quickly hit turbulent times.
Bankwest had performed solidly in government hands until the mid 1980s, when the combined impact of the deregulation of the banking market and meddling by the Burke government weakened its position. It was sold to British interests but eventually became a subsidiary of the Commonwealth Bank.
AlintaGas initially performed well in private hands, but an ambitious attempt by some directors to buy the enterprise backfired. It wasn’t a happy ending.
The sale of the gas pipeline was a spectacular success. But it was rumoured the American owners paid too much and failed to invest to increase the pipe’s capacity in line with growing demand.
And the future of several country rail services, especially the carting of grain, has been under a cloud because of debate over who is responsible for maintaining the rail – the government or the private owners?
Mr Buswell kicked the privatisation debate along when he released the budget’s mid-year review on December 18. Announcing the prospect of a marginally improved surplus, he singled out the Kaleeya Hospital in East Fremantle, the Utah Point berth at Port Hedland, and the Kwinana bulk terminal as sales candidates.
The government is getting plenty of encouragement from the Chamber of Commerce and Industry WA. In its submission to the Economic Regulation Authority last September, the chamber said: “The ERA should review options for asset privatisation to free up the state’s balance sheet and provide funds for other purposes.
“Historically, infrastructure has always been viewed as a public good, provided by the government for the benefit of the broader community.
“However infrastructure assets do not necessarily operate efficiently in the hands of government. Private sector operators, with a profit maximisation objective, are better placed to operate infrastructure that requires efficiency.”
While Mr Barnett has stated clearly that assets such as Western Power or the Water Corporation are not for sale, he added a rider, saying that “assets within organisations” could be sold.
“We might sell a power line dedicated to an individual mine – it does not need to be publicly owned – but we would not sell Western Power,” he told parliament. “There may be facilities at a port … we might even look at a power station, who knows?”
So there appears to be plenty of scope.
What wouldn’t be pleasing the government, however, are the problems associated with the Corrective Services portfolio, in particular the high-profile escape earlier this month at Geraldton Airport of two prisoners who were being guarded by officers from the British firm Serco, which provides custodial services for the department.
The government will be quick to stress that contracting out services previously done by the public sector is not privatisation. The opposition and the unions beg to differ.
Serco is a massive service provider with a growing presence in Western Australia. It operates the Acacia prison at Wooroloo, and is expected to employ close to 1,000 people providing services when the Fiona Stanley Hospital opens at Murdoch later this year.
Asset sales become more attractive for a government with money problems, which is why Mr Barnett and Mr Buswell are so interested – a marked change from the turbo-charged economy days when Labor’s Eric Ripper was treasurer and $1 billion budget surpluses were common.
The challenge is to come up with a sales program that can’t be labelled a fire sale or ‘selling the family cutlery’.
It’s a fine political line.
