The growing global appetite for state involvement in industry, as evidenced by two recent decisions of Boris Johnson’s new government in the UK, is also taking hold in Australia.
The growing global appetite for state involvement in industry, as evidenced by two recent decisions of Boris Johnson’s new government in the UK, is also taking hold in Australia.
And Western Australia is not immune.
Last year, The Australian Financial Review reported that the federal government had considered nationalisation of the superannuation system.
That followed state-level discussions about nationalising the power grid in South Australia following a blackout in 2017.
In the US, bills were introduced to Congress for the government to take responsibility for the manufacture of prescription drugs in 2018 (failed to pass), while there has been debate in California about public ownership of the power network after bushfires caused by electrical issues.
Two of the biggest moves made recently were those of the conservative UK government in the transport sector, with an airline bailout and a rail renationalisation.
The country’s Department of Transport terminated a contract five years early for the northern rail franchise, which had been operated by Arriva, a company owned by German business Deutsche Bahn.
Arriva moved 108 million passengers a year in the region including Manchester, Liverpool and Sheffield.
But the company reported a £223 million loss in the most recent financial year, and had nearly half of its trains arriving late.
That was partly driven by strike action, problems with other operators, issues with the network itself (which is publicly owned), and troubles with rolling stock.
From early March, the rail services have been operated by the UK’s Department of Transport.
Airline Flybe, which services regional parts of the UK, was granted a £100 million government bailout in January, but went into administration early this month.
UK Labour had been even more ambitious going into the country’s recent election, with nationalisation plans that would have cost £182 billion, according to the Confederation of British Industry.
The CBI cited the energy sector, where power prices had come down by half, and water, where leaks were down by a third, since privatisation, as examples of the benefits.
WA moves
The latest nationalisation move by the state government has been insourcing non-clinical and patient support services at Fiona Stanley Hospital from August 2021.
That will involve a once-off cost of $12.9 million, and a further $8 million annual ongoing cost, the government claimed.
Serco will continue running 21 other services until at least 2027, after a $730 million contract extension, the government said.
The government had not responded to a request for a business case or further detail at the time of publication.
The move means 650 jobs will be brought into the public sector
It comes after the government moved to insource operations at Melaleuca female prison and Water Corporation maintenance contracts.
The government said French services giant Sodexo had asked to be released early from the Melaleuca, although the government confirmed to Business News it had not known the expected cost from insourcing when it made the decision.
That came after a 2018 report by the Office of the Inspector of Custodial Services, which had criticised Sodexo and the Department of Corrective Services for the managing of the facility and the contracting arrangements.
The Department of Corrective Services was similarly criticised by the inspector in April 2019 for overcrowding at the Hakea Prison.
Late last year, the Water Corporation insourced maintenance work from Programmed, and said it would save up to $3 million, the value of the company’s margin.
A source familiar with the contract told Business News at the time that Programmed had saved the corporation about $18 million in the past seven years, and there were no issues with performance.
