NSW Premier Kristina Keneally’s decision to defer the sale of the second tranche of the state’s electricity assets may be an embarrassing backdown – but that doesn’t mean it isn’t smart politics.
By admitting that the second round sale “may well be a matter for an incoming government after the election”, Keneally has turned up the heat on Opposition Leader Barry O’Farrell to make his privatisation position clear.
Mr O’Farrell has repeatedly refused to say whether he supports privatisation of the state’s electricity assets.
Neither advocates nor opponents of privatisation were happy with Keneally’s hybrid “halfway house” model that left generation in the state’s hands but sold off retailing rights. O’Farrell will find it similarly impossible to please them both.
The Liberals’ traditional big business backers want to see O’Farrell pursue the full privatisation model attempted by Morris Iemma and Michael Costa in 2008.
But opinion polls consistently show around 80 per cent of the NSW population are opposed to privatisation. National Party voters in particular are concerned about price rises and service cuts to country areas. The unions would also like to see state ownership continue, as would many in the Green movement.
Influential figures from opposing sides of the debate have welcomed the second round sale delay and hope that the entire process can be wound back so their preferred model can be implemented.
NSW Business Chamber spokesman Paul Ritchie told Crikey that the second tranche was the “last leg of a bad dog”.
“Clearly the government has rushed it to get it out of the way before the caretaker period that starts in four weeks,” he said. “We would like this thing to stop.”
“It’s a process that everyone has condemned. When the business chamber – which has been the biggest supporter of privatisation and private investment in the electricity industry – says not to do it then something is wrong.”
Fierce privatisation opponents Bob and Betty Con Walker, authors of Privatisation : sell off or sell out?, agreed.
Ms Walker, a former NSW Treasury official, said, “We think they should negate the first tranche. It’s such a dud deal that it should never have happened.”
Ms Walker said she had received emails from National Party MPs worried about the impact of power privatisation in their local area.
Both Mr Ritchie and Dr ConWalker disputed Treasurer Eric Roozendaal’s oft-repeated claim that the sale was needed to secure the state’s triple A credit rating.
“It’s not in danger and hasn’t been in danger,” Dr Con Walker said. “And even if it was downgraded the cost is $15-20 million a year in interest payments. It’s a minimal increase on interest rates when you’re talking about a budget of $60 billion a year.”
Mr Ritchie said that the state government could easily negotiate with ratings agencies to keep its credit rating intact by outlining its future privatisation plans.
But such furious agreement will not last. The opponents and advocates of privatisation are welded to long held ideological positions and are loathe to accept any compromise.
Barry O’Farrell has some tough decisions to make before he releases his energy policy next month.
On reading this the views of Bob and Betty Con appear reasonable and their position justifiable – it begs the question why this privatisation adventure was ever embarked upon at all. But delving further into their work I do get the feeling that they would relish a sharp change in direction back towards the big government approach of British Labour in the 1970s and earlier. It would be good to hear a range of views on this issue – in particular from an expert or experts without any links to Eric/Kristina et al on side, and Bernie Riordan, Unions NSW etc on the other.
My contempt for this NSW Labor Govt just grows – daily! They knew that the people of NSW were against this sell off, but went ahead, in the dead of night etc. Now it looks like we’ll only get a tiny amount of the monies ‘gained’ so what was the motivation? I’d love to hear from those directors?
The arrogance of this mob is just breathtaking! The threats of the people on the Parliamentary Inquiry panel are also amazing! The directors weren’t the ‘crooks’ the Govt Members were! In fact, I agree with Tony Maher I think, who said, that the whole ‘parliament’ is “on the nose”! There’s a long way to go with this story I believe!
I look forward to Barry O’Farrell’s energy policy, but I’m not waiting in anticipation of something really positive – he’s as weak as ???? Pathetic! I don’t trust the Libs to really represent the interests of the people of NSW! They never have before!
80% of the people in NSW are against privatization. Shouldn’t that be enough? If only those 80% would stop voting for those neo liberal parties that insist in selling off the county’s assets-in-common then we may get more responsible governments.
The problem with privatizing these assets are many but here are some.
1) Once the deed is done and the government has its hand on the cash it tends to spend (as opposed to invest) that cash until the bonanza runs out. Then what? Credit rating fall, taxes increase and /or costs are cut and seldom those costs that represent genuine inefficiencies. More likely the costs that are cut will be on education, health and the environment – in effect not really consumable -type costs but actually those that represent investments in our future. If taxes are needed to prevent downgrades in credit rating then they should be levied, and if the level of borrowing is so high as to risk those downgrades then tax revenues or genuine cost savings should be adjusted to allow for payback of borrowing over time.
2) Privatization is most often sold as being all about increasing efficiencies. Well efficiencies may or may not result but if they do the “proceeds” end up in the hands of the corporate owner not the consumer or taxpayer.
3) Usually assets that are privatized are monopolies or near monopolies. What more could a private corporation aspire to than to get its hands on a monopoly? And if government exercises control over the services provided and the prices charged by these monopolies then they a) expose themselves to the corruptive lobbying power of the corporations and gaming of the system as was the case with Enron in California.