Outsourcing and Privatisation

[Macy]

Does anyone actually believe there is any benefit to the tax payer/ population from the outsourcing and privatisation of state and local government functions?

Think of the millions made on the back of the eircom floatation.

Think of the number of waste disposal companies that are creaming it in, whilst the Government are claiming pay by use is to encourage recycling.

Why do capital projects have to be funded by public private partnerships when we're running at a Budget surplus and record lows in terms of borrowing? Not necessarily anti-toll charges, but why should the toll go to a private company when the country could pay for an recoup the benefit themselves?

Doesn't it also encourage corruption, or at the very least lead to allegations or concerns of corruption when private companies are milking it in from local government who used to have their own equipment, staff etc.

Not necessarily party politically motivated, as all the main parties will probably go down this route given the chance, but I think it's wrong and doesn't make sense to me. Why should we be at best giving private companies money for nothing/little?

[wws]

my guesses

1.appear "free market" - appearances is everything to the current junta
2. enriching private individuals and companies is how you sppread political patronage and favour - its intrinsic to ruling since the year dot - this is teh modern way of doing a time honoured political tactic- all these individuals are connected by far less than the eight degrees of seperation and they all make sure everyone else is sorted out



here endeth the lesson



not bad for a tuesday morning!


macy you're so naieve.....recycling!!! ha ha go back to russia Pinko!

[Peadar]

Outsourcing is the way forward, especially in the ICT sector.
For the most comprehensive service and competitive contract rates, PM or e-mail me. :D

[pete]

A private monopoly is just as bad as a public monopoly. This would be the case against eircom & probably same for those waste companies you mentioned.

IMO the vast majority of state functions should be outsourced privately. State should accept tenders for jobs from private companies. State can regulate the performance of private companies.

Why does the state need to run hospitals? Surely the state can pay someone else to do it more effeciently? Same could even be said for schools - does state need to manage schools as it'll will still retain the education curriculum.

I'm anti tolls for reason that already paying enough in road tax to pay for roads & tolls are not evenly distributed across the country & they tolling bypasses which is just stupid. Don't have anything against the PPP as oong as state not taking all the risks.

[Macy]

If the State can't manage the civil service, how is it going to manage private companies?

Where is the evidence that private companies will do it cheaper, with a better service to the customer, than State/Semi State/Local Government? I've experienced a fair few privatisations and outsourcing of services when I was living in the UK, and I can't think of any that have lead to a better service. Possibly utilities, but that's more the breaking of the monopoly and competition than because of privatisation.

[dcfcsteve]

If the State can't manage the civil service, how is it going to manage private companies?

Where is the evidence that private companies will do it cheaper, with a better service to the customer, than State/Semi State/Local Government? I've experienced a fair few privatisations and outsourcing of services when I was living in the UK, and I can't think of any that have lead to a better service. Possibly utilities, but that's more the breaking of the monopoly and competition than because of privatisation.

The fundamental principle of economics is that supply will follow demand. That principle is prevented/distorted with state monopoly provision of services. Consumers do not have the option of going elsewhere, the lack of price competition means prices are almost always at artificially high levels, and you're stuck with whatever range of products and services that state monopoly decides to provide, regardless of whether it meets your needs. That therefore leads to longer-term inefficiency in the distribution of assets, employment etc etc, and reduces the international competitiveness of firms within your country. This thereby reduces the overall wealth of your country etc etc

Now - the state could open a market (say telecoms) to competition, but retain 100% control of the existing monopoly supplier itself. Firstly - a company with 100% share of any market is an incredibly valuable asset. Once that market was opened-up, there would only be one way the state-owned company's share of the market could go. After 5 years, they could find that the vast majority of the company's market share and value has been eroded through superior competitors. Would it therefore have been a wise choice to not go with the certainty of cashing-in up-front ? The state would effectively have frittered away vast sums of public money by trying to play a game it has proven itself time and again to be woeful at (the efficient meeting of customer needs). And that's before you get into more complicated issues - how could you justify paying market-rates to staff in one state company but not another ? How could you dramatically alter the management and service ethos of a state organisation to enable it to survive effectively in a completely new environment ? If Eircom was currently state-owned, but worth a fraction of what it was when privatised, do you think the media and public would be forgiving of the government's decision not to go with the safe option and sell-it up-front ?

If you accept that competition brings benefits to markets - which it clearly does - then the question needs to be, what is the best way for the state to maximise that competition etc. The bottom line is that the state does not and should not be 'gambling' with public money by fancying its chances of winning in such a game. History has shown that it won't. Once it's decided market-liberalisation is the way to go, then its duty to its citizens is to take the safe option, get the best price for its assets, and let others get on with making or losing millions instead.

Meanwhile - there are numerous examples from the UK where privatisation/opening-up markets has led to undoubted benefits in the provision of services. If each country in Europe still had air travel from their country tied to particular carriers only - like the bad old days - do you think you'd be able to fly an Irish airline from London to Latvia for £2.50 return ? Take telecoms services since BT was privatised c.15yrs ago. It took a good few years to arise, but new competitors are now rife. You can now sign-up to any number of suppliers who'll give you free local calls, stupidly cheap international calls, and they'll throw Broadband and movies into the package as well - for the same price that pre-privatisation BT used to charge for line rental only. Competition is what has enabled this to happen. As long as the big privatised firms are failing to satisfy their customers or missing a few tricks in terms of their product range, new competitors can and will arise to take advantage of this.

There are, of course, examples where privatisation has not seen all of these benefits. But this is invariably for reasons other than a flaw with the inherent concept : e.g. it was done badly by the government in the first place (UK railways - though you can still make advance-paid journeys far, far cheaper than you could under the old single-tarriff BR system), the infrastructure inherited was in a bad state (e.g. UK water privatisation), sufficient controls weren't introduced to stop private monopolies taking the place of state ones (e.g. UK bus privatisation).

It's no coincidence that the most open markets are also the most successful in terms of growth, GDP, foreign-direct investment, standard of living etc. To be fair, they also tend to have the greatest gap between rich and poor, but that is an area in which the state sensibly can and should be active. Unlike telecomms. And I'd still rather be poor in an open market, where the opportunities exist for me to address my situation, than in a closed-one where I'm pretty much stuck with my lot in life.

[dahamsta]

The mistake that was made with Eircom is clear now and was clear at the time: The telecoms network, like most service provision networks, is a natural monopoly that doesn't lend itself to competition of any form in the short to medium term, simply because building out competing networks is not economically viable. Alternative networks can be (and have been) constructed in areas with high demand, but just like the public transport system, the wider network will deteriorate and suffer as a result, particularly in rural areas.

So Gov.ie should have retained the network and sold off only the retail arm of the business, and as I mentioned, this was clear at the time to anyone with even a modicum of interest in the communications industry. There's no question that Gov.ie were advised that what is happening now was going to happen, they just chose to take the advice of clearly biased commercial interests, to the detriment of consumers and businesses that are now having to deal with some of the highest communications costs in Europe.

Yes, some state services should be privatised, but not natural monopolies. And traditionally, it's only natural monopolies that are state-owned in countries like Ireland anyway.

adam

[pete]

Some of the worst and/or most expensive services in Ireland are state run
No private Airport operators.
ESB is state monopoly - we pay some of the highest charges in Europe.
Public transport - no private rail or city bus service operators. Government should have no role in dublin city bus services - could easily tender the provision of services on vasious routes just like done for subsidised air travel inside the island by Aer Arann.

Areas that have benefitted from killing state monopoly
- Air Travel
- Inter City bus services

[Aberdonian Stu]

Our main problem with privatisation is that it's not selective enough. For example privatising all of transport is silly, however it is reasonably logical to privatise most of it excluding rail. As rail is a necessary service to large parts of the economy but has extremely limited profitability, keeping it makes sense.

[Macy]

Areas that have benefitted from killing state monopoly
- Air Travel
State monopoly has been killed, but the State owned airline is profitable.

Ditto Dublin Bus - they actually make a profit, and support the public service provisions of the Dublin Bus network. Privatisation would achieve nothing but private companies creaming off the profitable routes and leaving the state to pick up the unprofitable routes. I was living in Manchester during the privatisation and de-regulation of buses. The service from where I lived is far worse and far more expensive now, after an initial time when it was a bus every five minutes

ESB is being primed for a cash windfall for Government, I mean privatisation.

[dahamsta]

No private Airport operators.This is ridiculous. Air transport should be privatised, but regulated heavily, obviously.


ESB is state monopoly - we pay some of the highest charges in Europe.This has only become true recently, up until a few years ago we paid some of the cheapest. The prices are being raised artificially to prepare for privatisation, which just goes to show that privatisation works both ways. As with the telecoms infrastructure, the national grid is a natural monopoly and as such is better suited to state control. Privatise the stations, certainly, but again, regulate the crap out of them unless you want to go the way of California.


Public transportThe problem with privatising public transport is getting the government to stop once they've started, and getting them to regulate it properly. Don't forget that there's a lot of controversy over Aer Arann and those subsidies, and the same will happen with any privatised public transport operator running rural routes. They'll be looking for handouts for routes that are profitable during the day but not at night, for example, handouts for this, handouts for that. Public transport is a very tricky one. Although I can see certain benefits coming from privatisatin, I think on the whole I'd prefer to see it remain state-controlled.

adam

[pete]

Aer Lingus profitable for probably first time in its history. Well obviously it was profitable pre Ryanair but at expense of collusion with other airlines & fleeing the public. IMO Are Fungus should be lost asap as long as worthwhile price attained. State airlines are largely basketcases & only a matter of time before comeback with begging bowl.

The ESB seems to be about to be split into Network (Grid) & Supply. debatable if irish market large enough to support private suppliers but if we were connected to NI & UK could in theory buy electricity from anywhere in the EU.

There is alreg demand for commuter bus services that Dublin Bus are not matching so simple solution is to allow private operators provide what Dublin Bus has decided not to provide.

[Macy]

Aer Lingus profitable for probably first time in its history. Well obviously it was profitable pre Ryanair but at expense of collusion with other airlines & fleeing the public. IMO Are Fungus should be lost asap as long as worthwhile price attained. State airlines are largely basketcases & only a matter of time before comeback with begging bowl.
It proves that it Aer Lingus can be profitable. It was in a regulated market along with everyone else so you can't blame them for that - now it's providing the state with a surplus, and people want it sold off? Bizarre if you ask me, keep it when it's losing money, sell it when it's paying that loss off..... What happens in the future depends on the Management put in place - the Government could have kept the current Management (with all their dodgy IR practices) if they'd been willing to support investment.

[pete]

Bizarre if you ask me, keep it when it's losing money, sell it when it's paying that loss off..... What happens in the future depends on the Management put in place - the Government could have kept the current Management (with all their dodgy IR practices) if they'd been willing to support investment.

Companies are worth more when they making money. A lose making airline is almost unsellable.

[dahamsta]

But it's not a loss-making airline. Are you suggesting that we should sell it now because it may or may not become a loss-making airline again? By that logic I'd like Fianna Fáil and the Progressive Democrats removed from power because they may or may not bring the country into recession again.

(I'm being facetious of course. I know they'll bring the country into recession again.)

adam

[pete]

But it's not a loss-making airline. Are you suggesting that we should sell it now because it may or may not become a loss-making airline again?

Yes. Multinationals do it all the time.
Spruce up subsidary before launching it as breakaway on stock exchange or selling or to other interested parties.

Multinations do it when restructuring & may want to focus on core activities in same way Governments don't need to run airlines, hotels (through Aer Rianta)...

The airline industry is very cyclical. I think Willie Walsh was also in charge there when they came out with post 9/11 comments that no one would fly to the US no matter what price they charged. Of course they found out everyone has their own price they'd risk it at.

I think the government will be lucky enough to find purchaser for Aer Lingus so sale only makes sense if good price.

[dahamsta]

Yes. Multinationals do it all the time.Ireland is a multinational now? Who knew! Where's my dividend?

[Superhoops]

Ditto Dublin Bus - they actually make a profit, and support the public service provisions of the Dublin Bus network. Privatisation would achieve nothing but private companies creaming off the profitable routes and leaving the state to pick up the unprofitable routes. I was living in Manchester during the privatisation and de-regulation of buses. The service from where I lived is far worse and far more expensive now, after an initial time when it was a bus every five minutes.
Not true. In 2003, according to their published accounts, Dublin Bus made an operating surplus of €7.3m, after receiving a State grant of €53.8m. An operating surplus is not a profit!