A new word that explains a lot

A new word that explains a lot

Over the last couple of months I’ve heard some new words from policy-makers. Both conjure up memories from the big brother school of government.

One is ‘social programming’ which at least sounds impressive.

The other is ‘de-privatisation’ – and this needs to be taken a bit more seriously.

I’ve heard it applied to the Government’s plan to give a competitive advantage to non-privately operated pre-schools. But in fact it’s a word that explains a number of recent policies.

Re-nationalising ACC, buying back Air NZ, buying back the rail track network, increasing Government control of the energy sector via the Electricity Commission – all are examples of a tendency to tilt the playing field against the private sector.

Backing off public-private partnerships for roading, imposing levies on private training enterprises, and making importers and exporters bear costs of border security for the whole country – these are also examples of the same tendency.

They have been spaced out over a period, and the cumulative trend may not be apparent to everyone. But the de-privatisation word tends to put these actions into context. Certainly, it seems to underpin the growth in Government activity and in the numbers of those employed to implement these developments

In the case of the pre-school scheme the changes seem, on the surface, purely benevolent. More taxpayer funding to give pre-schooling free of charge for three and four year olds – what could be wrong with that? Well, unfortunately the scheme is likely to lead to the closure of privately operated pre-schools, since the taxpayer funding will go only to pre-school centres that are not privately operated. That will entirely skew the pre-school and day care market.

The children to be subsidised are around 30% of all kids at pre-school (since most go to privately-run pre-schools or are outside the age limits for the subsidy), but the result of the scheme over time will be an exodus from privately operated pre-school centres to community ones, harming the viability of private sector preschools and resulting in private pre-schools going out of business and working parents losing both services and choice – de-privatisation in action.

The pre-school scheme is consistent with another Government initiative in the education sector – the planned levy on private training enterprises to pay for damages if any PTEs go under.

At present all PTEs are required to have student fee protection mechanisms in place to refund students for any financial loss, but the Government now intends to additionally levy all PTEs in case any of those mechanisms fail.

It’s entirely inappropriate because the Government controls the entry, monitoring and exit of all PTEs while the PTEs that will have to pay the levy have no control over who enters the market and no way of managing their risk under this proposed legislation. As with the pre-school scheme, it simply amounts to a handicap placed on private operators.

It seems plain enough that first class infrastructure in the education, health, transport and energy sectors will take all the tax dollars available and then some. And there’s no free lunch – someone’s tax pays. That’s why public-private partnerships that facilitate private capital investment to complement taxpayer funds make sense.

De-privatisation indicates a different social agenda at work. It’s hardly a ‘great leap forward’ but it’s certainly pointing in a similar direction.

Perhaps it’s time we started keeping count of all the recent and proposed changes that could be considered partial or full ‘de-privatisations’ – in transport, resource management, energy, education, accident compensation and other areas.

Like the frog basking in the gradually heating pot of water, we’d do well to consider the real cost, in future taxes, of squeezing out competition and contestability.

Simon Carlaw is Chief Executive BusinessNZ.

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5 Jul, 2004

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