A look into privatisation
A glimpse of the wonders of privatisation was provided on October 17 when a report tabled in the NSW parliament by the auditor-general, Tony Harris, dredged up the scandal of the Sydney Harbour Tunnel and similar deals.
Recommending an overhaul in procedures covering $8 billion worth of joint ventures between the government and private companies, the report reviews deals that have been done in the state by both the previous Labor government and the current Liberal incumbents with private companies to build major public works. It revealed arrangements delivering billions of dollars of public money to the private sector, without the details even being tabled in parliament.
Most is known about the "ensured revenue stream agreement" entered into by the previous Labor transport minister and now federal minister Laurie Brereton in relation to the Sydney Harbour Tunnel. The tunnel was to be constructed, financed and operated as a private venture for 30 years, and then revert to government ownership.
The report reveals that the NSW Roads and Traffic Authority provided an interest-free loan of $223 million to the Sydney Harbour Tunnel Company, owned by Transfield Kumagai, over the 30-year contract period. Interest forgone on this amount was estimated at a minimum of $1.1 billion. Combined with guaranteed monthly payments to the company over the 30 years, the bill to taxpayers will be around $4 billion.
Labor came in for fierce criticism over these arrangements from the NSW Liberals at the time of the 1988 election campaign. The Liberals promised to suspend the project but reneged on this promise shortly after, claiming a "discovery" that the contracts were "water-tight" and could not be legally broken.
The Liberals appear to have learned from Labor's experience — learned that it is best to keep details of privatisation deals secret. This is done through "off-budget" financing deals that require no mention in parliament. A public accounts committee investigation during 1993-94 concluded that parliament need be provided only with summaries of the contracts within three months after they are signed.
These deals, many associated with transport construction projects, are conveying extraordinary profits to the private sector participants. In one feasibility study for the Sydney-Mascot airport railway link, revealed in the Sydney Morning Herald, the arrangements proposed would give the consortium involved overall returns of 48-81%. The government's return would be a pitiful 2%.
Meanwhile, for the Sydney Harbour Tunnel motorists are now paying a toll that is 40% more for each crossing than the government pledged would be charged.
The NSW auditor-general's report highlight the colossal stupidity of the mythology employed by both major Australian political parties, that private projects are better than public, because they're cheaper. Public companies don't need to make a massive profit at our expense, unlike the beneficiaries of government largesse.