Eliminate waste? Start in Canberra THE AUSTRALIAN 26 SEPTEMBER, 2014 Adam Creighton Economics Correspondent Sydney ARRIVING at Canberra Airport on a Monday morning at the beginning of a parliamentary sitting fortnight is a depressing spectacle for anyone even remotely averse to waste. Hundreds, perhaps thousands, of bureaucrats, political staffers, corporate rent-seekers and politicians descend on the nation’s capital at huge cost to people who have no idea they are paying. If the immense cost of flying them all there (often business class) isn’t depressing enough, the process of conveying this cargo of rent-seekers the short 7km to the parliamentary precinct is the coup de grace. Uninitiated commuters might be fooled that the nice staff from Canberra Elite Taxis, a local monopoly, were bunching together passengers heading to the same building in the same cab to save everyone time. But no, they soon discover that a system has emerged whereby each individual passenger pays the full fare. With four passengers, the 10-minute cab ride costs almost $80. Three passengers, $60; the fare is not “split” as it would be in Sydney or Melbourne, say. Every day perhaps tens of thousands of mainly taxpayer dollars are frittered away. That no bus had been commissioned by the government to ferry the routine arrival of hundreds of people at a fraction of the cost is remarkable given the supposed budget crisis. But it is a good example of how anti-competitive, wasteful arrangements — often to the benefit of one or two well-connected companies — are able to flourish to the detriment of the wider public. The interim report of the government’s competition inquiry, released this week, provides a timely and important set of recommendations that call for exposing more government services and practices to competition. Proposals to deregulate retail trading hours, end absurd pharmacy ownership restrictions and remove regulations effectively preventing the importation of cheaper books and second-hand cars would grab the headlines. But the more formative and potentially beneficial recommendations relate to ways to improve government efficiency. Government may quite reasonably want to engineer a particular social outcome, for instance ensuring children are educated to age 16 to a particular standard. They may require ambulances attend crash sites in less than 15 minutes or hospitals to meet certain efficiency and service standards. But there is no reason why government itself must ensure such outcomes, as the Harper Review suggests. “A separation of regulation, funding and provision of human services can improve outcomes for users, including through enhancing choice, diversity and innovation,” the review says. The potential benefits from more efficient delivery of human services will only increase as the population ages and calls for further subsidies of a growing range of aged-care services proliferate. Public private partnerships, where government commissions private firms to deliver projects, are now the norm for large infrastructure. The idea that all engineers and builders working on public roads and railways should be public servants, as they once were, is quaint. Use of PPP in human service sectors is greater than most think: private prisons house almost 20 per cent of Australian prisoners, about 70 per cent of childcare is for profit and private hospitals service about 40 per cent of all patients. According to the review, the West Australian government has achieved cost savings of 23 per cent a year after setting up the Joondalup Health Campus near Perth. But the presumption is still that nurses in public hospitals and school principals and nurses are public servants Greater use of PPPs has no bearing on the level of government spending, only how it is delivered. Indeed, were schools run more efficiently government might be able to save money yet spend more on fewer and better teachers. Consider that in 2013, for instance, state governments on average paid $10,411 per student per year in recurrent costs alone to educate children in public schools. In other words, educating a class of 25 primary school students from 9am to 3pm for 40 weeks is costing taxpayers $260,000 a year. Few teachers are paid more than $100,000 a year, suggesting scope for efficiencies. It is less easy to make similar calculations for the costs of managing public hospitals, but they too face negligible incentive to save money (indeed, their more rational incentive, as for any bureaucracy, is to ensure all allocated budgets are spent whether truly necessary or not). Also receiving little attention is the review’s discussion of the anti-competitive potential of so-called professional licencing standards. Such standards, especially as established by medical and legal fraternities, are dressed up as quality controls but they happen also to restrict supply, which boosts the costs of such services. As the Hilmer Review found more than 20 years ago: “It is totally unfounded to assume that a professional, simply by virtue of his or her qualification, is somehow above the profit motive and therefore should not be subject to market competition like all other service providers in our economy”. The government should ask the Productivity Commission to investigate to what extent direct and indirect restrictions on entering the medical and legal professions benefit or harm the public good. It is theoretically possible for such decisions to be made by independent bodies with few links to the professionals themselves. theaustralian.au/business/opinion/eliminate-waste-start-in-canberra/story-fnc2jivw-1227070785568
Posted on: Mon, 13 Oct 2014 08:24:20 +0000
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