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Wednesday, 27 November 1985
Page: 2352

Senator SIBRAA —My question is directed to the Minister for Finance and it refers to the current interest, both in Australia and overseas, in the question of privatisation of public assets. I refer in particular to the Thatcher Government's privatisation program. Are there any lessons for Australia in this program and are there any similarities between the Thatcher Government's program and the privatisation proposals of the South Australian Opposition?

Senator WALSH —There are certainly lessons to be learned from the British experience. The principal lesson to be learned is that privatisation is a device used by Tory governments to fund current expenditure by flogging off public assets so that they can promise tax cuts immediately before an election. For example, the issue before last of the Guardian Weekly referred to the Thatcher Government's recently announced plans to sell off the British Gas Corporation and the British Airports Authority, both statutory monopolies, and the statutory monopoly will be preserved after the so-called privatisation. The Guardian Weekly made this observation:

The real reason for the sale of BGC and BAA is not even mentioned in the Queen's Speech. It is to raise cash for tax cuts in the run-up to the next election. British Gas alone (which made a cool billion profit last year) could command a price of anything up to #8 billion. If sold in three tranches this could add approaching #3 billion a year to the #2 billion plus privatisations already in the pipeline, and provide 3p in the pound of income tax reductions.

That is an across the board reduction in the rate of scale of 3 per cent. The Guardian Weekly asked rhetorically:

But who could seriously support income tax cuts financed by selling off the nation's capital assets?

Well, the answer apparently is that the Thatcher Government could support it and the Olsen Opposition supports it and plans to do precisely the same thing in South Australia in the highly unlikely event of its being elected on Saturday week.

Other similarities between the practices of the Thatcher Government and the proposals of the Olsen Opposition are that either, or sometimes both, of two conditions are applied. Firstly, the Government retains a majority equity in the organisation supposedly being privatised. For example, in British Oil the Thatcher Government retained a 51 per cent public equity, which happens to be precisely the same figure as the Olsen opposition proposes to retain in the South Australian Oil and Gas Corporation-that is, the majority of the ownership would remain in public hands. Similar arrangements apply in Great Briain to British Aerospace, British Telcom, British Petroleum, and Cable and Wireless. Secondly, in other public enterprises too numerous to mention a golden share provision applies. Irrespective of the level of equity, the public shareholder-that is, the Government-retains voting control of the companies allegedly privatised.

Another feature of the so-called privatisation in the United Kingdom is that in some instances it has in fact led to an increase in regulation. Given that the objective of the policy is to cash out capital assets-to fund current consumption by flogging off assets-it is not surprising that the regulation is maintained. The regulation frequently confers monopoly powers on the corporations which are allegedly being privatised and, because of those monopoly powers, the capacity to charge monopoly prices. So as well as selling off the physical assets which are owned by some of these corporations, the Thatcher Government is capitalising the anticipated economic rent which flows from the statutory monopolies that the corporations, having had parts of their equity sold off, possess.

There are lessons to be learned from the British experience-lessons which appear to be absorbed very effectively right now by the South Australian electorate-and there are also similarities. In both cases the underlying objective has been identical; that is, to deceive the people by funding tax cuts through flogging off physical assets owned by the public and capitalising anticipated economic rent.