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Sunday, May 16, 2010

Defending public services

First Published in SFWU magazine Our Voice

Water and electricity provision; road, rail, air and sea transport; hospitals and schools; facilities for sports, leisure and cultural activities; communications networks; police stations, courts and prisons; council and parliament buildings – these are all what is called “public infrastructure”.

These facilities and services are crucial for the well-being and proper functioning of a civilised society and they have mainly been provided by the state in the past.

However, since the 1980s, much of the public infrastructure has been privatised around the world. A global infrastructure market has emerged through which huge private trans-national companies (TNCs) can make massive profits – companies like Macquarie Bank and Goldman Sachs.

In April, the SFWU hosted a visit from Dexter Whitfield, a UK expert on the privatisation of public assets. He has written about, and fights against, the latest version of privatisation that goes under the name of “Public-Private Partnership” (PPP). A PPP can also go under other names like “Private Finance Initiative” (PFI) and “Strategic Service-delivery Partnership” (SSP).

While he was here, Dexter spoke to trade unionists in Auckland, Hamilton and Wellington. His talks were based on his latest book called Global Auction of Public Assets.

PPPs are the latest way finance companies and private equity and pension funds are investing in public infrastructure. The private sector provides finance and management; it designs, builds and operates projects like roads and hospitals. They expect a very healthy return on these investments of 15%-plus profit.

Dexter says the excuse governments make is that the private sector can do things more efficiently and cheaper than the state (i.e. the government). But when you add in the profit margin it is clear that money that could be spent on hospitals and schools is instead going to line the pockets of the super-rich.

It’s not even true that the private sector more often build projects on time and in budget. Dexter’s research shows their record is no better than the public sector. And when private sector projects fail, the public sector has to pick up the tab. He has identified $US500 billion worth of PPP failures internationally.

Helen Clark’s Labour Government had to buy back Air New Zealand and Tranz Rail because the private sector operators were going broke and we could not allow our national air and rail transport infrastructure to collapse.

But this National Government is going to use a PPP model to build the new men’s prison in South Auckland. It is talking about doing the same for school buildings and other public infrastructure here in New Zealand.

Dexter talks about the crazy situation in the UK where a school built and operated under a PPP closed down because no one would go to it, and yet the 35-year contract still has to be paid out to the private investor.

He points out that tax-cutting, low-spending governments can never properly fund infrastructure development. Those promoting PPPs manipulate the figures to make the private option look better and cheaper.

PPPs are funded by raising money against the security of future income streams from service users who, Dexter says, “are saddled with ever-increasing tolls and charges”. The illusion is created that the financing is privately provided when it is only a loan against future spending from taxes and service charges.

Private companies also pick up lucrative consultant contracts to provide analysis and planning of provisions of public needs: analysis that inevitably maximises private profits and minimises private risk. PriceWaterHouseCooper is a good example of these consulting firms.

Workers in the public sector suffer as private contracting replaces secure employment. Pay and conditions come under attack, Dexter says.

Worst of all is the creation of a market in the buying in selling of the public infrastructure loans and shares, in which Dexter says schools and hospitals are sold like commodities to infrastructure and private equity funds and companies.

Infratil is one such company that operates here in New Zealand. It owns the majority of the public-transport bus services in Auckland and Wellington. It owns Wellington Airport and it also recently purchased the chain of Shell service stations. As a private company it can be bought and sold. The Act-National super-city plans for Auckland will open up the Port of Auckland, Auckland Airport and probably Auckland’s water and waste-water services to private investment and ownership.

Dexter argues that vital public needs should be provided for transparently and democratically. There is a public sector alternative to private-profit-making methods of infrastructure development. Public provision needs to be publicly planned, designed, built, financed and operated.

Our union should insist that a public or in-house option is put up whenever a contract comes up for renewal in the public sector, for example for cleaning services in a school or hospital.

He urges unions and other civil and community organisations to mobilise the widespread opposition to PPPs and privatisation.

Dexter works for a non-profit organisation that contracts its services to trade unions and community groups who are fighting against the PPP form of privatisation of public infrastructure. Its website has more information at .

1 comment:

hardiansyah said...

nice post and information. thanks