The perils of privatisation - why it remains a bitter pill 

1 September 2020

Article from July 2020 edition of INPractice

“SA Pathology has stepped up to the plate during the coronavirus pandemic and provided South Australians with a world-class COVID-19 testing service that has reduced the spread of the virus and saved lives,’’ Premier Steven Marshall said at  the time.

But there are fears within the public sector that once the initial wave of the pandemic has passed, the privatisation push will be game on, if not necessarily for SA Pathology then certainly within many other areas of public sector activity, including health care.

The ANMF  (SA Branch) has long campaigned against privatisation of our public health services in many forms, from the expensive outsourcing experience at Modbury Hospital (1995 - 2007), through to the more recent public private partnership (PPP) model used for the redevelopment of the Royal Adelaide Hospital.

For the ANMF, this has led to a respect for the particular role played by the private hospital and health care systems in complementing the public system whilst protecting the value and distinct role that public services play in securing the health care of our community.

“The State Government had a very active campaign of planning for privatisations during the last budget,’’ says SA Unions Secretary Angas Story.

“They set up a group within the Treasury Department to look at outsourcing, commercialisation, public-private partnerships or privatisation. They had an active program of privatising prisons and trains and selling off other bits of capital infrastructure,’’ Mr Story said.

“I have no doubt that all of those options were live and have only been put on pause during this period where there is heavy reliance on the public sector to address all the challenges of the pandemic.

“It’s very likely, as the enormity of government debt sets in, that the Government will again start actively looking for areas to privatise.

“The big consultancy firms constantly promote privatisation of state assets, the things that belong to us, the taxpayer.

“They look to transfer them for private profit. The only way these things make a profit is by skimming off the top and that means either charging people more than they were paying for it when they owned it or reducing the services they were getting when they owned it.

“One or both undesirable outcomes is a certainty.’’

Former sub-regional secretary for Public Services International [to which ANMF (SA Branch) is affiliated], Michael Whaites says there are a litany of privatisation failures worldwide.

“I think the most important thing is to understand that tension between the provision of a quality public service and producing a profit,’’ Mr Whaites says.

“When we look at health care privatisation in Australia we’ve had seven examples of hospital privatisation failure and then another four where the privatisation of support services in those hospitals failed.

The UK has had 12 hospital privatisation failures, so it’s a global failure.

“The reversal of the decision to privatise  SA Pathology is great news for South Australia. The community would have seen either increased costs associated with getting your blood tests done, or poorer access over time.

“People talk about not going to the GP because they can’t afford it anymore. And then when you finally get there the GP doesn’t do the pathology, they sign a form and hand it to you and say go down the street and get that done.

“And that’s a private clinic, there’s a user fee there. So what that means is people  are going to the EDs instead.

“In times of austerity governments look to privatise because it hides the cost from the government’s budget bottom line. But what we know actually is if you want to boost an economy then investing in public services is the quickest way to do that.’’

Figures provided by Public Services International show that health care expenditure in the US, the most heavily privatised system, was in 2015 sitting at 16.9% of its Gross Domestic Product (the value of its total economic output each year). In Australia it was 9.3 per cent.  “Our Medicare and public hospital combination is one of the most efficient in the world in terms of cost and outcome,’’ Mr Whaites says.

“One of the common claims of those who favour privatisation is that we can’t afford the public health system.  But the truth is we can.  Not only do we have one of the most efficient systems in the world, there’s plenty of money available to governments to spend on quality public services.

“Clamping down on tax minimisation by big business and multinationals, along with getting rid of some inefficient tax subsidies for individuals and replacing them with some progressive taxes that wouldn’t affect workers, could deliver the Federal and State Governments at least $54 billion a year by some estimates.

“Providing quality public services is a matter of choice about what sort of society we want to live in.  Research shows that investment in public services and infrastructure boosts an economy, but some in business and in government would have you believe otherwise.”

Dexter Whitfield, Director of the European Services Strategy Unit and a world- renowned authority on privatisation, “absolutely” believes public investment is ultimately the most efficient and cost-effective approach.

While public investment may appear to cost more on an initial, short-term basis, “what happens is the private sector always comes back for additional payments from the government over the length of a contract,’’ Professor Whitfield says.

“When you look at the overall cost, based on a comprehensive economic, social, equality and environmental impact assessment and cost/benefit analysis, in my experience it will always show the private sector is more expensive.’’

Mr Whitfield, who is based in Ireland, is also Adjunct Associate Professor, at the Australian Institute for Industrial Transformation, within the Flinders University of SA. His latest book Public Alternative to the Privatisation of Life, describe the follies of privatisation and offers an alternative blueprint.

He says Australia has a track record of failed hospital privatisation, including in SA where the State Government was forced to take back Modbury Hospital in 2007 at a cost of millions.

Mr Whitfield’s book details how almost $A500m was wiped off the share price of four large care home operators in 2018 after the government launched a royal commission into allegations of neglect,  fee gouging and misleading marketing.

The book reveals that Australian Unity and PriceWaterhouseCoopers had earlier identified the sector required $57bn in additional capital spending for aged care and hospitals by 2040, plus an additional $30bn in annual operating costs, over 400,000 additional care workers and 120,000 nurses.

“I’m a firm believer in public investment and particularly for health and social services,’’  Mr Whitfield says.

“There’s only one way we get really good quality health service and that’s through a universal system, with public health, primary care, medical and social care integrated together and working together.  Common terms of conditions could provide more career opportunities and so on.

“You look at what’s happened in Britain: integrated health services would have avoided many of the gross mistakes that have been made around the pandemic.

“A lot of social care workers still don’t have adequate supply of PPE.

“Many care homes received patients from NHS hospitals but they had never been tested before they were transferred. A lot of care workers in those homes are black and Asian workers, they’re the ones who have had a higher death rate compared to other care workers. Care home patients account for about 45% of pandemic deaths and is a growing scandal in Europe and it’s the same in America.’’

Social justice advocate Dr John Falzon, the former national CEO of the St Vincent de Paul Society, believes the aged care debacle is a classic example of why the profit principle fails people.

“Neoliberal governments dismantle what is publicly owned and privatise institutions and sectors away from the common good to being primarily for profit,’’ he says.

“We’ve seen the disastrous consequences for the aged care sector where what should have been about the care of people has become primarily about the increase in profits.

“This is disastrous for society … when you have the dismantling of not just the public sphere but the dismantling of the principle of being for the common good then everybody suffers.’’

One of the reasons why the failure occurs is because of the complexity of public services, Mr Whaites says. “Imagine trying to bundle up what a public health system service does and putting that into a contract, it becomes massively expansive,’’ he says.

“And then on the other side a private company has never had experience running a public service so they can’t possibly be across all of that minutia either.

“So with hospital privatisations that we’ve seen in Australia, a number of them have had exactly the same pattern where the private provider took over the operation and within a period of time has had to go back to government to try and renegotiate the tender or ask for more money because they can’t realise the anticipated profit.’’

Angas Story believes the successful response to the COVID pandemic underscores the virtues and vitalness of the public sector.

“Right now people are seeing the value of having a public sector that is capable of delivering on what are their most basic needs, a need to protect the citizenship, the health and wellbeing of all of us,’’ he says.

“It’s very stark that it’s only the public sector that in times of crisis, be it bushfire or pandemic, you come back to the role of government and the public sector to preserve those things which the community really, really  needs.’’
So how do we go about protecting our essential assets from being denuded and decimated for the benefit of shareholders?

“The biggest thing we’ve got on our side is that the public knows that privatisation is a scam. There is poll after poll that shows that people oppose privatisation,’’  

Mr Whaite says. “This why the private sector and governments that are-pro privatisation keep coming up with different names for it … ‘public-private partnerships, social impact bonds, contracting out, outsourcing’,  
it’s all privatisation.

“So just saying to the community the government is going to outsource, the government is going to privatise this industry, is enough to get the community onside, that’ll get them angry.

“But to get them moving you start talking about the sort of society we want to live in.

“What we say to them is it’s going to cost you to go to hospital. Your health care will depend on your postcode, not on the Medicare card in your pocket.

“We’re heading to the American health care system, so we talk about what the health care system is going to look like under privatisation.

“Or even better we talk about the kind of service people want. So you want a health care system where you can walk in, get the care you need at the time you need and the quality that a country like ours can afford.’’

“It’s a matter of campaigning for that while that awareness is high,’’ Mr Story says.

“We need to be making sure that people realise that it has been a huge public sector effort along with a community effort that is the key to us meeting the current (COVID) circumstances.’’

SA Unions recently launched an advertising campaign featuring ANMF (SA Branch) Councillor and enrolled nurse, Tammy Bornhoeft, advocating for a strong public sector. The advert urges the public to “say no next time politicians tell us to make the public sector ‘more efficient’ by cutting budgets and staff or privatising services”. View the full advert at:

“The second thing though everyone can do as a worker is join their union,’’ Mr Story says. “Because in doing this advocacy and this campaigning we are much stronger together and the more of us that carry this advocacy role together, the stronger our voice, the more likely we will prevail.

“Over the roles there have been some very contorted attempts to create artificial markets in health to pander to those who believe that a market economy can solve everything and these forms of privatisation and artificial competition have done very little other than really reduce the services which the public sector has been able to provide.

“There needs to be a strong, well-financed public sector which in turn then complements an active market economy.

“But you can’t have one without the other.’’