Friday, August 29, 2008

Politics Over Policy


Politics Over Policy

It seems that “infrastructure” has become a real buzzword in recent years. We hear it all the time, in a variety of contexts. Private equity funds became obsessed with infrastructure funds, an obsession which is now unraveling in the credit crunch fallout. The Federal Government has been elected on a promise to revitalize the nation’s infrastructure, and has even established a statutory body to oversee the process. State Governments have spent the last few decades palming off their infrastructure obligations to Private Equity investors, so that now they are trying to make up for lost ground.

One of the reasons the New South Wales Government gave us for its plan to privatize power was to allow the money to be spent on other important infrastructure such as hospitals and transport. In other words, they wanted to sell some infrastructure in order to pay for other infrastructure, including for example the much vaunted Metro rail plan.

It has emerged through the Sustainable Sydney 2030 report that rail investment over the past eighty odd years has been non existent. The result is that comparable cities around the world have as much as ten times more track in their city centres than does Sydney. No wonder people complain about the trains. This is a classic example of the failure by successive governments to honour their obligations to the people.

The demise of the Premier’s plan to privatize power means that the Government now has to redraw its budget. The question now is what plans will be scrapped to make up for the shortfall? The Metro? Hospitals? Schools? At the same time, the mysterious “Plan B” which the Premier claimed not to have, has now emerged and will see the sale of the electricity retailers while the Government will retain the generators. This is actually worse than no privatization because it is the generators which will cost money under the future Emissions Trading Scheme, and which will have to be replaced with new technology at the cost of $15 Billion or more.

The truth is that the whole mess is the result of decades of government failure to adequately plan for the future, whether it is electricity, or transport, or hospitals. This government in particular has had a bad record of making announcements about projects that never see the light of day. It has depended upon Public Private Partnerships based on dodgy contracts to provide the infrastructure that should have been the responsibility of government, and now it can’t afford to deliver on its own promises. Privatization has become the panacea to cure all government shortcomings, and now that this privatization plan has fallen over, the government has been caught short.

Although Barry O’Farrell has been accused of placing politics ahead of good policy, the need for privatization has arisen now only because of poor policy in the past.

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