Private Concern


In 2010, New Zealand Council of Trade Unions economist Bill Rosenberg asked the following: If privatisation is the answer, what was the question?

Five years on, the question remains and the answer seems to be somewhere between political ideologies and short-term gains.

Illustration by Jem Yoshioka

Illustration by Jem Yoshioka

Story by Shelly Biswell

About the time Back to the Future was making its way to screens around the world, New Zealand politicians started discussing the idea of public debt.

The concept made its first public appearance in the 1987 Budget. According to the estimation of the government of the day (the Fourth Labour Government) there were only three ways to reduce government debt: raise taxes, cut government spending or sell our assets.

While historians will continue to debate the success of the economic reforms of that era, the PSA view is firm that the impacts were significantly negative. One thing that cannot be denied is that New Zealand is still being affected by the values Rogernomics instilled.

The recent book Ruth, Roger and Me by Andrew Dean (reviewed in Working Life, June 2015) takes a personal look at the impacts of these reforms on the generation that grew up during them, and proves an often harrowing read.

As the architect of the economic reforms, former finance minister, Roger Douglas acknowledged in the early 1990s, “I am not sure we were right to use the argument that we should privatise to quit debt. We knew it was a poor argument, but we probably felt it was the easiest to use politically.”

That political ease was little consolation to those who were working for the various jettisoned public assets – from New Zealand Rail to Telecom to the Government Printing Office – and to the public who lost both valuable services and priceless resources.

Since the partial sale of state-owned power companies and Air New Zealand in 2013-14, the Government’s plan has shifted away from wholesale privatisation of assets towards the privatisation of services.

Instead of state-owned companies being sold, the Government is increasingly paying private companies to provide services (at a profit) that were traditionally run by the state for the benefit of all New Zealanders.

Efficiencies at any cost

Glenn Barclay, PSA national secretary, says that controlling public debt and seeking cost efficiencies can be reasonable, but not at the cost of sacrificing public services and a strong public sector.

“The reality is that private enterprises are focused on profit. That’s a completely reasonable model in the private sector, but as events at Serco-managed prisons earlier this year illustrate, it’s simply not good enough for public services.”

After serious allegations of physical assaults and fight clubs, the Department of Corrections was forced to take over the management of the Serco-run Mount Eden Corrections Facility in June this year.

An investigation by the Prison Inspectorate followed, the results of which are not yet known.

In September, the government acknowledged that Serco may still lose the contract once investigations are complete. At time of writing, Serco have gone to the High Court challenging the draft report by the Inspectorate, telling RNZ News that they do not feel they have adequate opportunity to respond to the issues raised in it.

Another Serco-run prison, Auckland South Corrections Facility in Wiri, has also been in the spotlight in recent weeks with allegations surfacing of similar troubles. Auckland South opened in May this year as New Zealand’s largest public-private partnership, with a contract locked in for 25 years.

“Staffing levels at the Serco-run facilities were insufficient to ensure staff safety and proper monitoring of prisoners. It was an untenable situation,” PSA national secretary Erin Polaczuk said at the time the initial allegations surfaced.

“Private companies like Serco are not subject to the same public service ethos as those directly employed by government. When corporations are put in charge of vital public services, all New Zealanders lose.”

Working Life spoke to several PSA members working at Mount Eden Correctional Facility on condition of anonymity about the changes they have seen since management was given back to Department of Corrections.

“Staff are absolutely loving the change,” says one of the workers. “We feel supported by our colleagues and our manager. Under Serco you could go months without seeing a manager on the floor, but now there’s regular contact and checking in. We feel supported by our fellow colleagues from Corrections including their managers.”

The visibility of management isn’t the only difference. One worker told us that now, “there’s a sense that safety is paramount, under Serco it often felt more like lip service.”

Since the Department of Corrections took over, “Serco staff have been provided with stab-proof vests,” Working Life was told.
According to one of the staff we spoke to, when asked if those same vests would become a regular part of the Serco uniform, a Serco manager said “No. That is under Corrections’ policy and not Serco’s.”

After having a more positive experience since the Department of Corrections management takeover, PSA members at Mt Eden don’t know what to expect if the change is not made permanent following the investigation.

“We’re nervous about what the future holds. We have no confidence that anything will really change if we were to go back to Serco.”

Playing to each sector’s strengths

Glenn Barclay says there is an underlying message from the Government and its supporters that the private sector is more capable of working efficiently, and that public servants are somehow not able to bring the same innovation and efficiencies to issues.

“Whether in the recent Child, Youth and Family review or major changes to public housing, the government has made it clear that it favours private or community solutions to public issues, but it’s an approach that is often counter-productive.”

“Change of this nature also dismisses the strengths of the public sector – and public servants, while compromising the important role of kaupapa-driven community organisations, often without supplying them with the full funding they need to provide services and pay staff fairly.”

There is another way to go about change, and this can be seen in other parts of the wider state sector. Rather than favouring private solutions, communities can be empowered to articulate their own needs, and to engage locally with public services to create structures to support these needs.

The school sector is one example of this, with public servants in the Ministry of Education providing the framework, resources, training and expertise to enable local Boards of Trustees to ensure that schools meet the needs of their local communities.

Unfortunately, much recent change seems to run counter to this – with expertise from public servants frequently ignored during the change process.

Jeff Osborne, PSA assistant secretary, says the Government’s decision to transfer 2800 properties from Housing NZ to the Tāmaki Redevelopment Company makes no sense when the roles of the two organisations are completely different.

“Housing NZ are the experts in social housing and are best placed to manage it for the benefit of Tāmaki residents,” he says.

“The purpose of the TRC is to innovate, but now they will be bogged down with business-as-usual social housing work.”

Jeff also notes that where large changes need to occur, they must be well managed.

“In a project like this there’s a need for a project plan to be in place from day one. It doesn’t need to be set in stone, but should be a living document that people can see and work to. It’s also important to keep everyone involved in the project informed,” he says.

“Information is more than just inviting people to meetings, it is clarifying resourcing, dependencies, timeframes and milestones,” he says.

Thinking locally

PSA organiser Angela Collier says there’s very much a “wait and see” approach to contracting out services within local government right now.

“Local authorities are under pressure to reduce costs and employees’ pockets are often seen as an easy target. Contracting out services means that to be ‘price competitive’, service providers pay poor wages to the people who work for them.” 

Glenn Barclay agrees and says that’s why the recent decision by the Wellington City Council to step up to the Living Wage challenge has been a real high point for local government workers this year. The Council has recently begun a move to pay at least $18.55 / hour to contractors as well as those directly employed by the Council.

“We hope that other councils will take this important step to ensure fair wages for all workers – whether employees or contractors.”

Angela says a broader issue within local government right now is working through the myriad of change proposals.

“With the failure of recent amalgamation proposals [Northland, Hawke’s Bay and Greater Wellington], the Government is considering legislative change to facilitate better regional coordination. These are interesting proposals, but we need more details on what powers council-controlled organisations might have and whether there will be an emphasis on contracting out services,” she says.

“We’re also seeing several councils considering asset sales. We’re aware that this is being discussed in Christchurch and Auckland, for example.”

Glenn adds that the PSA is cautiously optimistic about the more restrained approach to contracting out services that some authorities are now taking, for example Wellington City Council bringing its parking warden services back in house.

“This approach is a gain for workers and more prudent in terms of accountability, health and safety, and the overall work environment.”

An international perspective

Illustration by Jem Yoshioka

Illustration by Jem Yoshioka

Glenn Barclay says the emphasis on privatising doesn’t take into account that our public services are considered some of the best in the world.

“New Zealanders have more confidence in and are more satisfied with their public services than the OECD average and we are in the top four countries in the OECD for public sector efficiency.”

While there is an emphasis on a public sector cap, the reality is that the number of people employed in public services is small – 38 per cent smaller than the OECD average, and jobs are still being cut.
New Zealand also contracts out more services than the OECD average.

“It’s crucial to reframe the public discussion on this issue. While our members know that they are under greater and greater pressure, the political conversation too often returns to the rhetoric of ‘burgeoning public services’,” says Glenn.

“It’s these type of unhelpful statements that chip away at the public’s perception of the public sector and incrementally ‘build’ the case for privatisation. For the PSA this is a fundamental concern and an issue that we are addressing on a number of fronts.”