Delivery failure: the private sector is no place for essential services

Feb 2, 2022
(Image: Unsplash)

The politically driven demise of well-run public institutions has had damaging consequences, with the COVID pandemic providing a wake-up call.

As we work our way through the various perspectives on government in Australia, it is important to remember that it is not enough to fret about the system, the quality of contemporary politicians and their advisers, their sympathy for the interests of those who fund them, the sad fate of many public sector departments and agencies or the state of the media.

Behind the problems in these areas, which are diligently unearthed by think tanks, academics, media commentators and some politicians, is the enduring and changing debate about big ideas which provide the compelling drivers for all the debates and policy positions.

We are living with a set of ideas that has enjoyed general acceptance for 40 years. We are now approaching a realisation that the drive from these big ideas has run its course. If for no other reason than given the discontent of a substantial part of our democracy, we will face a reckoning.

Ronald Reagan still attracts approval in comparisons of post-war US presidents. His view of government remains influential among political leaders in the US, UK, Australia and other developed democracies. As he put it in his inaugural address delivered in January 1981: “Government is not the solution to our problem, government is the problem.”

Margaret Thatcher signed up the UK in support of this idea and many prominent Australian politicians jumped on board as well. They felt they could rely on the judgment of three prominent economists for whom Reagan’s statement expressed a philosophical conviction more than the results of detailed and reliable empirical analysis in advanced economies. Many Australian economists and newspaper editors embraced this big idea and, in many cases, still do.

In Australia, and in the face of emerging significant problems in the delivery of essential services, policymakers started from the proposition that public sector institutions were inherently ineffective and inefficient.

This nostrum underpinned economic deregulation and a willingness to create policy mechanisms in which those dependent on government for essential services or support could be despatched into a market lightly regulated and well funded by the taxpayer. The answer lay in establishing a market, defining outputs or services, setting a price for provision and adopting light-handed regulation of those operating in the market.

Many established national public sector delivery institutions were allowed to wither with little effort devoted to developing their expertise or the capabilities of those employed within them. At the Commonwealth level:

  • the ability to offer effective public employment services disappeared and those who most needed help often missed out as they wrangled with disconnected services in the new market;
  • most aged care and disability services were left to the private sector – public funding yielded profits at the expense of service quality as experienced by those dependent upon the profit-taking providers of services;
  • Robodebt compromised the ability of government to deal with those most in need of help; and
  • for a while, many operating within the private vocational education and training sector corruptly defrauded students.

In these and other areas, up to half the population dependent on a variety of essential services funded and managed at the national level missed out on quality services. The Commonwealth government cut back the capacity of the Australian public service to supervise outsourced services delivery.

Countless connections at local community level were lost as public servants became concentrated overwhelmingly in Canberra at a significant distance from actual service delivery to communities. It seemed as if a technocratic approach in Canberra could do the trick. It didn’t.

Have the state governments done better? Unambiguously, yes. They maintained contacts with local communities.

State parliamentarians could not afford to walk past failures in service delivery. On both sides of politics at the state level, parliamentarians agitated for remedies when services were failing.

However, there is one noticeable failure at the state level – correctional services. Rehabilitation is no longer effective and correctional systems simply recycle offenders. Even in Texas, government has realised the need for reform and achieved remarkable improvements and a reduction in expenditure.

In Australia it is now common to attribute the malaise in the delivery of essential services by the private sector to the willingness of ministers to assign important activities (including policy work) to those willing to fund their party. Robert Menzies avoided this trap as did many who followed him.

This is a problem, but the cause of the malaise is to be found elsewhere. The uncritical reliance on the Reagan/Thatcher big idea about government has meant that no serious debate has tested whether it is true. Attitudes research over several years by the Centre for Policy Development would suggest a bigger appetite for government in Australia and a stronger conviction for our democracy to improve the lives of others.

We now need to assess in a hard-headed way the respective efficiency and effectiveness of private and public delivery of essential services.

The lazy habit of thought apparent in the Treasury and Finance departments is to continue, happy with the assumption that the private sector will do a better job of service delivery. The aged care royal commission proves the opposite. The prevalence of deaths in the Commonwealth-administered private aged care homes compared to the relatively low number that occurred within state-run facilities during the early stages of the Covid pandemic in Victoria illustrates the human consequences of applying this big idea without testing it.

Instead of a commission of audit, the party elected to government at the next election should set up a competent independent council to get to the bottom of whether the private sector is indeed more efficient and effective in delivering publicly funded services than well-run public institutions. This council could start with hospitals as an example – public hospitals are significantly more efficient than private ones.

Ministers should also confront their assumptions about the superiority of outsourced policy work. If they abandon investment in a professional public service, which is up to date and capable in many specialised areas beyond micro-economics and administrative finesse, they will be managing a succession of disasters and contemplating the difficulty of finding a job after a shortened parliamentary life.

The pandemic must be a wake-up call that smaller government is not the answer. Indeed, smaller government in the face of a systemic crisis is a problem – one of our own making.

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