For decades there has been a relentless chorus – rather like Orwell’s four legs good two legs bad – conditioning us to believe that private is good and public is bad.
Like the pigs in Animal Farm we have been subjected to a messaging campaign which promoted what true believers and beneficiaries claimed was a deep economic reality while actually justifying de-regulation and the devastation of public sector staffing and expertise.
Three recent examples – aged care homes and vocational educational training and the outsourcing of security staff at Victorian quarantine hotels – illustrate what is actually an economy wide problem.
In the current COVID-19 Victorian aged care home outbreaks the Premier has noted, that of 769 cases only five were in state-owned facilities. This could be explained by the relative numbers of privately owned and government operations but only 4% of aged care homes are operated by governments and simple arithmetic shows that the private ones represent 99% of the total of COVID cases.
The process which produced these results came in three stages: framing the issue as private good and public bad; renaming nursing homes as ‘care’ homes to obviate the need for actual nurses while appearing cuddling and caring; deregulation; and, then consolidation in the hands of large listed and private companies.
The Australia’s residential aged care industry consists of an estimate of 3,000 aged care providers providing more than 200,000 residential places. The majority are government subsidised allegedly to keep costs manageable and affordable. Of the industry’s top 10 operators seven are privately owned and three are not-for-profits.
There are many little quirks which can make the operations more profitable: bonds, fees and some creative ones from Regis Aged Care (an Asset Replacement Charge) which the Federal Court of Australia decided was not consistent with the Aged Care Act 1997. These Regis charges were intended to “fund reinstatements of fixtures, fittings and infrastructure, rebuilding and construction of, or at, Regis’s residential care facilities” rather than direct care.
The company lost a sixth of its market value after the decision which illustrates just how investors rated the importance of these sorts of revenue.
The problems have festered for decades with the ‘kerosene baths’ scandal while Bronwyn Bishop as Aged Care Minister a low light.
In 2018 Four Corners broadcast a two part-investigation into the whole aged care sector revealing more of the rorts, poor care and costs involved.
But not all the aged care problems get quite so much broadcast coverage, for instance Estia Health part-owned owned by Kerry Stokes’ Seven Holdings doesn’t seem to have yet got a mention on their stations while other companies are getting front page coverage.
A similar pattern to the aged care situation emerged with vocational training as an August 2018 paper – VET FEE- HELP: What went wrong? – by University of Melbourne’s Francesco Saccaro and Robyn Wright shows.
In 2007-2008 changes to the Higher Education Support Act extended the Commonwealth’s loan program to full fee-paying students undertaking diploma level vocational training. It was supposed to be an equity measure. But in 2014 new legislation provided for what Saccaro and Wright call “a massive increase in VET FEE-HELP loans by both private and public providers’ resulting in a 2015 report into the operation of private providers which “highlighted examples of unscrupulous practices that became commonplace.”
The revised VET FEE-HELP scheme resulted in a shift of funding for higher level VET qualifications from states to individuals and a massive windfall for private providers. Profits were high, barriers to entry were low and with little accountability, unscrupulous behaviour was rampant. Vocational training was a commodity to be sold just like any other product and it became clear that many marketing brokers, driven by profit, sales targets and commissions, were blatantly using unethical tactics, including specifically targeting disadvantaged people.
Saccaro and Wright report that marketing brokers moved in “with sophisticated client management software, purchased client lists, generous inducements and rewards for those who signed up, and easy, ‘no wait’ streamlined enrolment processes. From 5,262 students with a VET FEE- HELP loan in 2009 the number jumped to almost 234,100 in 2014 ….. The total value of VET FEE-HELP loans accessed in 2014 ($1,757 million)” was double the 2013 figure.
“While both private and public providers grew their reliance on VET FEE-HELP, by far the biggest recipients were private, for-profit providers. Of the $770m in VET FEE-HELP payments up to 1 July 2014, 77% of payments were to for profit providers,” they said, concluding that funding for private operators doubled each year between 2009 and 2013.
There are many instructive moments in the marketing of VET FEE-HELP demonstrating how the good stays private rather than public.
A 2015 report into the rorts included one from the Canterbury Bankstown Migrant Interagency in March 2014,when a group of senior citizens from Bankstown (all from CALD background and little English) were talked into enrolling in ‘computer classes’ with Unique International College in Granville and Aspire College in Parramatta. It turned out that there was no computer class and they were all enrolled in different diploma courses……They were each offered a free computer/ipad or $1000 cash by taking out the loan.”
You also don’t have to privatise an entire operation to achieve the same result. A recent Four Corners-Age investigation into icare and WorkCover in Victoria showed that outsourced private operators can achieve the same rorts.
Victorian Ombudsman Deborah Glass told the joint investigation she had seen evidence that some agents were gaming the system for financial incentives.
“What I saw was, in some of those cases … downright immoral and unethical.”
Meanwhile, the public sector executives facilitating the process in NSW don’t do badly either. The investigative team saw “A confidential NSW Treasury briefing ……(saying) icare’s executive team is likely the highest paid in the NSW Government sector”. With top seven salaries averaging around $660,000.
But these three case studies are merely symptoms of wider problems. Moreover, Australia is not alone. Much of it started in the UK and has been a feature of US policy for many decades. What is common are the results: underfunded and unqualified staff, profiteering, corruption, scandals and rorts, fragile systems, shonky operators, higher prices to consumers and exploitation of taxpayers.
As Federal Reserve Chair, Alan Greenspan said in 2002: “It’s not that human beings are more greedy than in ages past, but the avenues to express greed have grown enormously.”