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Going private

Debate about privatisation of Government services has been reignited as a result of the yawning Budget gap.

The notion of closing that gap by wiping out the losses many Government services incur, along with the injection of cash that would result from the sale of the services, is very tempting.

But care needs to be taken.

Bermuda never had joined the wave of privatisations that occurred in North America and Europe in the 1980s and onward because many services such as utilities were already in private hands.

Instead, the debate then and now circulates around subsidised services such as postal services and public transport.

Opponents of privatisation argue that governments runs some public services at a loss because they are universally needed, but would be unaffordable or inaccessible if they had to be run as a private venture.

A prime example is public education. No one would dream today of charging for universal primary education, as the principle of free public education is well established.

When it comes to some of the other services being discussed, the argument in favour of a public service is less clear.

Few would dispute that Bermuda needs a reliable postal service, or that public transport is essential, both for those who do not have private transport, including the less well off and visitors, and as a public good and a means of reducing congestion and pollution.

The question those in favour of privatisation have to answer is whether a private operator can achieve the kind of efficiencies needed to be profitable while offering a universal service.

It is easy to argue that the lack of a profit motive leads to an inefficient service, but the scale of the losses are such that they would be hard to make up.

It might well be that a bus service could be profitable if the less heavily used routes and school buses were dropped. But that would beg the question of whether system would still be a “public transport” system providing a valuable and much needed service.

The same debate can be held over the ferries and the post office, where free door-to-door delivery could be abandoned, or the cost of a stamp could be increased dramatically in order to make the service viable. But would they still serve the public interest?

These kinds of decisions, along with cost cutting in the workforce, both in numbers and in terms of pay and benefits, have already drawn the opposition of at least one union, and more can be expected if pay, benefits and working conditions were changed.

It may be that it’s too late to even consider privatising the Post Office although it would have been workable if it was done a decade ago. The advent of e-mail, and the failure of the Post Office to compete with couriers for parcel important document deliveries means that it would be an unappetising prospect for any entrepreneur.

The introduction of competition elsewhere makes more sense. If some bus and ferry routes are unprofitable using Government’s behemoths, they might be successful for smaller vehicles and vessels, and in fact this has happened already to some extent with minibus services.

Private water taxi services could compete on many other harbour routes, however and would have to pay a Government licence to do so.

There are other, less obvious areas too. Government continues to pave roads and build roadside walls, and the time they take is often mind-boggling, especially when there are private services which could do it faster and more cheaply.

Like the Post Office, Government’s decision to sell off as yet unspecified property makes is happening five or more years too late.

By selling at the bottom of the market, Government will realise less money than it should have, and will also devalue property in the private sector, where there is already a glut. Assuming some of these properties are buildings, it would make sense to refit them thus generating economic activity and house Government workers in them, thus saving on rent.

This is a debate worth having, and there may well be areas where better services can be offered for competitive prices and the Government would still save money. So no one should reject the idea immediately.

It may be that it?s too late to even consider privatising the Post Office although it would have been workable if it was done a decade ago.

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Published March 01, 2012 at 1:00 am (Updated March 01, 2012 at 7:54 am)

Going private

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