The cost of outsourcing public health services

The current Victorian Hotel Quarantine Inquiry headed by the Honourable Justice Jennifer Coate AO is putting two things on trial – one predictable media fodder and the other at the root of decades of neo-liberal outsourcing and privatisation.

The first trial is the traditional one which fits neatly into standard media coverage: who did what, why did they do it, who did they tell, what did those told do and were Ministers warned or informed in some way?\

It’s very important but is only half the story. If there is an adverse finding against a Minister – as it’s inquiring into the Victorian Government rather than the Australian Government – it will cost them their job. If the Premier becomes implicated who knows although we do know he would immediately, again unlike the PM, apologise.

So far senior counsel assisting the inquiry, Tony Neal QC, has said: “Information already available to the inquiry suggests the possibility of a link between many of the cases of coronavirus identified in the Victorian community in the past few weeks and persons who were quarantined under the hotel quarantine program.”

Neal said the inquiry would look at: the speed with which the program was set up; how the decisions about its nature were made; coordination between government agencies; the suitability of the service providers; whether there was adequate supervision of the contractual arrangements; and whether there were ‘suitably qualified people’ employed.

This last term of reference prompted laughter from a friend who was a former senior executive in a company which owned a security arm. Who would thought there would be anything other than unsuitable inadequately supervised unqualified people involved he asked.

The inquiry has already been gathering information and interviewing people and the next public hearing will be on August 5. The Inquiry will report by 25 September meaning the Honourable Jennifer Coate and staff are extremely unlikely to get the huge payday Dyson Heydon got for his anti-union, get Gillard effort.

But the second trial gets to the heart of how neo-liberal theory and ideologues have wrecked public services; transferred billions of dollars to private sector providers; and, used outsourced services while gutting the public sector of expertise and resources.

The rationale, of course, is that the private sector is more efficient and more cost effective. The reality is different.

In Australia the effective privatisation of technical training, largely driven by a Labor Minister, resulted in poor quality courses, unemployable graduates and huge costs to the economy, the budget and students.

In 2015 Four Corners revealed claims of questionable behaviours by a small number of providers in the privatised Job Services Australia program. These included falsifying documents to gain government payments and setting up their own registered training organisations to reap more money while ignoring the most needy job seekers because they were too hard to help.

The program claimed governments paid out $18 billion to providers — both for-profit and non-profit organisations – between 1998 and 2015.

The value this spending created for the reputable and professional industry players is indicated by the 2014 $160 million sale of Therese Rudd’s 1989 founded Ingeus company (operating in Australia, UK, Germany and France) to the US Providence Services Corporation.

In Australia the providers’ peak body also warned that the system had a misalignment of incentives, was too complex, too focused on compliance, had become transactional, had minimal innovation, and was under-performing.

Australia is not alone in this madness. Indeed much of it was pioneered by Labour and Tory Governments in the UK. Since then almost every service imaginable has been outsourced. Court interpretation was handed over to a private sector company which couldn’t provide enough, let alone qualified, interpreters creating havoc in the court system. The probation service and benefit entitlement services were outsourced with disastrous consequences.

A vivid portrayal of the personal cost of this is Ken Loach’s film I, Daniel Blake, as the central character battles with outsourced providers committed to preventing people from accessing services and dying before he gets to the tribunal which was to hear his case.

Simultaneously the Blair government used financial alchemy through Private Finance Initiatives (PFIs) to build hospitals and government premises. The huge debt on hospital construction, along with chaos following management consultant driven reorganisations, severely handicapped the NHS.

In perhaps the finest example of the ridiculous system was the ownership of HM’s Revenue and Customs service HQ by a company headquartered in a tax haven.

Professional service firms have also been complicit in this in the UK and Australia. The consulting arms of the Big Four accounting firms and other consultants advise on outsourcing and then pick up millions of dollars in contracts to make up for the loss of public sector capacity and expertise. Richard Brooks’ book, Bean Counters, recounts this in detail.

Australia has yet to face a reckoning on this but a case study of what may come to pass is the Carillion collapse in the UK. Think of a government service and Carillion got a contract for it. The company collapsed in 2018 with seven billion pounds in liabilities.

Accounting firms reaped more than 72 million pounds in fees up to the collapse and at a House of Commons inquiry an MP told Deloittes and KPMG: “I wouldn’t hire you to audit the contents of my fridge”. And after the collapse PWC earned 20.4 billion pounds in fees in the first eight weeks of the liquidation.

How the Coate Inquiry will play out is unclear but inquiries frequently throw up the odd surprise. The government has promised full cooperation so we may well find out the truth about the hotel quarantine situation.

But sadly the Inquiry won’t be able to address the broader issue of blind ideological commitment to outsourcing and probably couldn’t in the time frame it has to report anyway. But someone, somewhere in Australia has to start addressing the issue.

As Labor has been complicit it might be worth a quick mea culpa and then some hammering of the government on the issue.

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Noel Turnbull is a blogger who has had a 40-year-plus career in public relations, politics, journalism and academia.

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