Essential services: the challenge of socialising problems and privatising benefits

If you live somewhere where your utilities — gas, water and electric — are run by privately owned organisations you’ll no doubt have experienced the benefits, and challenges, that come from having a choice of providers.

When there are multiple providers in the market, energy companies are incentivised to find cost-effective solutions to differentiate themselves. This can be beneficial as it often leads to new technology being developed, lower prices and a smoother customer experience but, more often than not, it can end in financial inequality.

Why? Well, the cost of that innovative technology, the need to hire more staff to help things run smoothly and the data-driven infrastructure needed for efficient maintenance and management tend to be covered by price increases. All of which are paid for by the consumer.

It’s the well-known, and ongoing, challenge of balancing the socialised problem (when a privatised utility company raises prices and the negative impact it has on low-income consumers) with the privatised benefit of, say, investing in new infrastructure, which is something that will certainly benefit the company’s shareholders but won’t necessarily benefit all consumers equally.

And while this is a challenge particularly felt by the energy sector it’s also experienced in healthcare, education and transport services.

The privatisation of state-owned assets was introduced, surprisingly, by the Hawke-Keating Labor government back in the 1990s — surprising as privatisation has a history of coming from politicians with a more conservative ideology.

The process continued to gain traction under the subsequent Howard government, which focused on gradually privatising key utilities such as electricity, gas, water and telecommunications.

The argument at the time was that privatisation would help the country become more efficient and encourage innovation and competition. However, concerns were raised about how costs would rise, inequality would flourish and companies would be driven by profits rather than the needs of the consumer.

Sound familiar?

While Labor state governments continued to push privatisation throughout the 1990s, 2000s and 2010s, the party’s current political pendulum seems to be swinging back towards public ownership. And Labor voters have never been happier.

Last year’s NSW election saw the State’s coalition government being ousted from office and Labor’s Chris Minns, claiming victory. A large part of his success was said to be down to his vocal opposition to the proposed privatisation of Sydney Water.

When it comes to winning a political seat on a pro-public ownership platform Minns isn’t alone — his Labor party colleagues have been singing from the anti-privatisation hymn sheet for years.

In 2022, Victoria’s then Premier, Dan Andrews, spoke publicly about the party’s 1990s privatisation of Victorian energy calling it ‘a mistake’ and said that the state’s electricity should be run for people, not for profit.

“Privatisation has failed”, Andrews said. “It’s failed pensioners, it’s failed families, it’s failed Victorians.”

That same year, Labor claimed back its seat in South Australia and pledged to return the privatised state railway network to public ownership. At the same time, Premier Peter Malinauskas spoke openly about his desire to bring South Australia’s electricity generation back into public hands.

And finally, before stepping down in late 2023 Queensland’s Premier Annastasia Palaszczuk’s Labor government created CleanCo, a $250 million-funded publicly-owned renewable energy generation corporation, which has been operating since 2019.

With so many state governments vocally pushing for public ownership of essential services, we might just be entering a political era where having a pro-privatisation agenda may act as a death knell for the opposing party.