The Longford gas explosion in 1998 was a prescient example of what was to occur under Victoria's Great Privatisation Project. The explosion, which killed two workers and left the state without gas supplies for two bitterly cold winter weeks, was blamed on lack of maintenance described as "a failure to audit for hazards" and properly train workers.
It led to a debate about the suitability of private enterprise with its cost cutting and profit motives to run public sector infrastructure. A debate which ultimately went nowhere.
Since then we have understood that privatisation in Australia is about privatising profits while keeping the risks in public hands. We understand that it, and its offspring the "PPP" or public-private partnership is a goose that lays the golden egg.
NSW readers will know about privatising profits, since toll road contracts in that state guarantee private operators will make a profit. Not enough traffic on the toll roads? The taxpayer will make up for it! Firstly with a hefty cash injection, and then to pay for the roadworks that will divert more traffic onto the private road.
Take another example. Melbourne's City Link toll road cost $2.2 Billion to build in 1999, and by the end of 2008 had already raised more than $2.2b in toll charges. These have increased by 64% over the nine years,
or three times the rate of inflation. Under the contract, the tolls may rise by 4.5% or the inflation rate every year, whichever is the higher. The rises occur every three months and tolls will be chargeable until 2034.
But there is more than one way to skin a cat, and running down the infrastructure of an already-existing public asset has become another way to turn a quick private quid. This is the same thing as asset-stripping and has the same result in that the company is rendered less valuable or even worthless. The mechanism for doing this is hardly rocket science, and it works the same way in every case:
When a public utility is sold off a new CEO is installed, invariably on a short term contract. There is one overriding brief to cut costs. Added to this is an incentive scheme or "performance bonus" that puts a
part of all cost savings directly into the CEO's pocket, and this can amount to more than ten percent of all the costs that have been cut. By the time the effects of this cost-cutting are felt, the CEO's contract has expired thus ensuring that no one will be held accountable.
It is a form of piracy on the public purse that is as beautiful in its design as it is simple to conduct.
A good example is Telstra, whose CEO Sol Trujillo left in February after his 3 year contract expired, taking with him more than $20 million in payouts. Trujillo openly boasted that he had sacked 10,000 Telstra
workers, a fact which may give us pause to reflect on why it takes so long to fix the phone these days.
With this method, the value of a company is gradually stripped from it, while the cost "savings" are distributed to the executives and shareholders. In 2005 when Trujillo joined Telstra it's share price was
listed at just over $5; by the time he left it had fallen to $3.68, or about three quarters of what it was. If you think of the mum-and-dad investors who paid over $7 for their shares when they were first issued,
you get an idea of how much value has been taken out of what was once one of the largest and most innovative telecommunications outfits in the world.
Trujillo's base salary of $3 million was considerably enhanced by a performance bonus of $13.4 million which surprise surprise is about ten percent of what it costs to employ 10,000 workers. It's important
to understand the numbers because this makes the entire process utterly transparent.
Greg Winn who with Phil Burgess and Trujillo were known as "the three amigos" who ran Telstra, collected more than $21 million in performance bonuses over his three years with the company. You can work that one out for yourselves.
When it comes to running down public infrastructure, there is no better example than Melbourne's public transport system. Sold off by Jeff Kennett during the '90s, it was widely expected to return to public
hands after the Bracks government was elected, but no such luck.
Current Transport Minister Lyn Kosky made no bones about not wanting the portfolio, since the outlook was clear for those who cared to look. Commenting on a recent government report that warned Melbourne's train network was unsustainable due to neglect, she blamed long-term underinvestment for the system's woes.
She had previously confided that running a private transport system is no cheaper than running a public transport system, the difference here being that about $60 million is syphoned off every year for the executives and shareholders, instead of being reinvested. Recently the official solution to chronic overcrowding on the trains was announced: to remove the seats from the rail carriages.
There is both neglect and profligacy in the story of Melbourne's transport privatisation. Or to put it another way, if you had $1.4 billion to spend on public transport under current circumstances, would you (a) lay more tracks, (b) buy more trains, or (c) establish a new way to sell tickets?
The choice of (c) was perhaps always a foregone conclusion, with the ill-fated $1.4b myki ticketing project running two years late, well over budget and generally described as a white elephant. The most recent
finding is that the system when it's finally introduced will slow down the trains and trams as people are required to use their tickets getting both on and off, thereby holding up the service. As an added
bonus, myki doubles as a de facto personnel tracking system.
The manager of the myki project, Vivian Miners was Australia's highest paid public servant before he was forced to leave under a storm of conflict of interest and shady share dealing allegations.
The most cryptic indication of criminal activity within "The Plan" however was minister Kosky's decision to quietly lock away for 50 years all documents relating to the Spencer Street Station redevelopment. In
short, we'll never know where the money went for that one. To give an idea of the magnitude of what is obviously being covered up, note that the official secrets act only diverts the public gaze for a mere 25
years. Another "private-public partnership" delivered late, over budget, left unfinished and ultimately under an ominous cloud.
What better way to cap the transport privatisation story off than to acknowledge that Melbourne's public transport is now Australia's most expensive in terms of ticket prices. In its degraded state, it has
increasingly become the site for violent crimes against the person. In the face of a growing number of violent attacks on train passengers of late, Victorian Transit Police have admitted they can't secure the
network and recently advised passengers that it's every man for himself.
The sinister side of privatisation is not just the running down of infrastructure and theft of asset value, it can be seen in the follow-on effects from these. Electricity privatisation provides a good example,
especially in the wake of Victoria's most disastrous bushfires for twenty five years.
Electricity privatisation in Victoria has been subject to the same form of deadly parasite as the telecommunications industry managers on lucrative short term-contracts with considerable "performance bonuses" built in. One of the first casualties of this kind of arrangement is usually maintenance, that essential ingredient to infrastructure that everyone seems to have forgotten about.
Two class actions have now been lodged in the Victorian Supreme court alleging that faulty power lines started the fires that wiped out a number of country towns and resulted in over 100 deaths.
The fire that destroyed Kinglake, Steels Creek and St Andrews is alleged to have started from a snapped power cable that was stretched between two poles situated two kilometres apart. The claim against SP AusNet is Victoria's largest class action, made on the basis of negligent management of infrastructure.
While the cost of this fire is estimated to be more than $500 million, the private company alleged to have started it has a maximum liability of only $100 million under terms of the original sell off. It means the government, that is to say the taxpayer, will have to foot the rest of the bill should the action be successful.
A second class action against SP AusNet relates to the fires at Horsham, Coleraine and Pomborneit, likewise alleging faulty infrastructure. Lawyers maintain their clients don't need to wait for the outcome of
Premier Brumby's royal commission "because they believed the cause of the fires was clear."
The cost of privatisation to the common wealth of ordinary Australians is unimaginable, and completely open-ended: it has permeated and impoverished almost every facet of life in Victoria. The loss can not only be counted in the untold billions of public dollars that have already disappeared into that great privatised black hole. It must be counted too in the bridges and hospitals that won't be built for lack of money, in the essential government services like education and health care that won't be delivered, and the number of pensioners who must live out their days in poverty because their drag on the budget is deemed to be too great for a rise in the pension.
One could easily form the judgement that our governments have actively conspired against us, have stood by and even colluded as the rug has been pulled from under our feet. The Great Privatisation Project is by any measure a disastrous failure for the common person, one that has already set the country back by decades as our public wealth, built up through the sweat and toil of previous generations is squandered, and all for nothing.
There should be hell to pay.
