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Economics References Committee
30/10/2015
Cooperative, mutual and member owned firms

BATT, Ms Karen, Federal Secretary, Joint National Secretary, Community and Public Sector Union

CHIU, Mr Osmond, Research Officer, Community and Public Sector Union

PERICA, Mr Mark Damian, Senior Legal Officer, Community and Public Sector Union

VAN BARNEVELD, Dr Kristin, Director of Research, Community and Public Sector Union

[13:05]

CHAIR: I now welcome representatives of the Community and Public Sector Union. Do you have an opening statement?

Dr v an Barneveld : Thank you for inviting us to appear before the inquiry. I would like to open by noting the union is actually not wholesale opposed to cooperatives and mutuals. We acknowledge that there are many successful operating cooperative entities and mutuals; however, we do not support these vehicles being used as a smokescreen for what really is the privatisation of government services—services that we believe should be provided by government.

It is important to note at the outset that the term 'public service mutual' is actually contested, with different definitions being used. In the home of public service mutuals, the UK, 'public service mutual' actually has a specific meaning. Organisations that were previously in the public sector but that became employee owned social enterprises and that continued to deliver the same service as was delivered as a public service. This UK definition of a public service mutual is the one that we use in our submission. I have to point out here that the proportion of employee ownership in these mutuals is low. In the cases we have looked at, venture capital has a significant share so, for example, the civil service pension scheme, MyCSP, is now 40 per cent owned by financial services company, 25 per cent by employees and the rest by government.

The definition being used by others is much broader. The Business Council of Cooperatives and Mutuals here has proposed to define Australian Public Service mutuals as organisations which wholly or in part deliver public services through a cooperative or mutual structure. They say that Australian Public Service mutuals may be one or a combination of consumer owned, employee owned and enterprise owned. It is really important to note the difference in ownership possibilities with this definition.

To go a little bit further, the BCCM also defines 'public services' as services which are funded, directed, managed or delivered by government. So in addition to the services provided directly by government organisations, under their definition, you could include services that have been privatised or outsourced and remain funded by government but delivered by for-profit all the community service sector or cooperative and mutual organisations. In other words, unlike in the UK, the definition proposed here expands the notion of public services into areas where the government has traditionally funded a third sector to deliver. The problem with this definition, in our view, is it really muddies the water. These are not public services as most people think of them; they are community sector services provided by not-for-profit organisations funded by government. It is very different. The CPSU seeks that the committee reject this broad confusing definition of what actually is a public service.

In any event, the UK experiment with public service mutuals has not been successful. There are not one million UK mutualised public servants serving the public as predicted by the responsible cabinet minister, Francis Maude, but fewer than 35,000 employed in around 100 mutuals. Why? The success of these mutuals has been varied. It is our view that the evidence is at best sketchy. It is clear that they are highly risky and there are significant set-up costs. They involve high levels of personal risk and liability, and they really only work when governments provide the financial and capacity support and occasionally the assets, which, in our view, defeats the whole object.

Supporters of UK-style public service mutuals have cited reports by the King's Fund and the University of Southampton as evidence of greater employee engagement and higher levels of innovation. It is our view that this research relies on incredibly small sample sizes and anecdotal evidence. One of the primary examples used by advocates here has been the Cleveland Fire Brigade in the north of England. It was highlighted in the media as a successful example of a public service mutual, when it is not. The Fire Brigades Union has informed the CPSU that the Cleveland Fire Brigade has not been converted into a mutual at all. Firefighters opposed the proposal, with a poll of members showing that 97 per cent of the fire brigade union members opposed mutualisation of the Cleveland fire service and, I think, more broadly. For a UK mutual to operate, these workers—

Senator XENOPHON: Sorry. What is it then? What is the Cleveland Fire Brigade?

Dr v an Barneveld : It has not been mutualised at all. It just operates as a public service, as it did prior—

Senator XENOPHON: How is it touted as a success story for mutuals, if it isn't?

Dr v an Barneveld : It has been written up in the press as an example of a successful mutual. I don't know why.

Senator XENOPHON: Or a successful spin doctor's story.

Dr v an Barneveld : Quite possibly so. We contacted the union and said: 'What's going on? How did it work?' And they said: 'We don't know what you're talking about. It actually hasn't been mutualised at all.' The poll of members has found that they do not want it to mutualise. The way that mutuals operate in the UK is that the workers have to agree to set it up as a social enterprise. If 97 per cent of them say no, then it is clearly not going to mutualise. That is our understanding.

There is the UK Association for Public Service Excellence, which focuses on service delivery in local councils. It has noted that the policy debate about co-ops and mutuals in public services has been dominated again and is relying on a really small number of what they call 'exemplar case studies'. They comment that much of the available evidence is written by advocates for a greater role of co-ops and mutuals in the delivery of services. Where independent information is available, it suggests that in many instances the quality of the service delivery has declined. We included two examples in our submission: Central Surrey Health and Circle Holdings. Since we put in our submission, the work that we have done and the work done by the SPSF Group has uncovered a lot more examples. Karen Batt will be happy to touch on those in a minute, with the indulgence of the committee.

More broadly, though, even where mutuals have been staff-led, the research that is available shows that service standards drop. While not in the frame of mutuals, we only have to look at the experience here of the Job Network, where, over time, smaller community organisations that took over the contracts from the CES lost those contracts to bigger organisations. This moves pure mutuals into the space of competitive markets and any connection with the community is quickly lost.

Senator XENOPHON: When you said Job Network, that is what you are worried about. It is in terms of that model.

Dr v an Barneveld : No. We are saying it is a different model. It is hard to give examples here. But you can see how you would set up privatised public services—in our view, to set up mutuals—and those mutuals fail over time and get sucked into larger corporations. So, whatever intention you had at the start is not what remains after 10 years of operation of the system, anyway.

Senator XENOPHON: There have been widespread criticisms of the Job Network and the way it has operated on a for-profit model. A recent Four Corners expose, Chair.

Ms Batt : The CPSU has also been involved in doing some additional research, which will be released fairly soon, that goes into a lot more detail in relation to the Job Network.

ACTING CHAIR: That can come before my committee. Much more?

Dr van Barneveld : Basically, where mutuals have been proposed to cover public service work, in the evidence that we have found, they have not actually been taken up to the extent predicted and there are real doubts about their success. We are really concerned about the government withdrawing from service delivery and having mutuals undertake this role, and that that is just a smokescreen for the privatisation and outsourcing of government services.

Senator XENOPHON: Thank you very much for your opening statement. When I was drafting this to put it up—Senator McKenzie co-sponsored it with me, and I know Senator John Madigan has had a longstanding interest in this—can I just tell you that it was not even on the radar. I do know if it was on Senator McKenzie's radar, but what has been happening in the UK was not even on my radar. I was thinking about farmers co-ops, grocery co-ops, book co-ops and banks or banking-type services—that is where my motivation has been. So I have actually been quite surprised. I know that some of my colleagues have raised this with me. Senator Doug Cameron has articulated similar concerns to me, as has Senator McAllister, who was here earlier. So I just want to make it clear that I am surprised. It is good that you made the submission, but I was heading in a completely different direction.

Having said that, you have now opened this area up and it must be looked at. You may want to look at the evidence in the Senate Hansard from the BCCM and see what Ms Morrison has said about that. I think they too did not want to engage—they have been going on a different path, with respect to it being a genuine mutual and there being a lot of cooperation and consensus. Hopefully I have not misrepresented what Ms Morrison has said. She is shaking her head; that is good. I just want to give you that assurance: the direction I have been heading in has been about building up the capacity of community groups and community organisations, not somehow to have privatisation or outsourcing of services by stealth.

Having said that, if there is a model there that can provide government services with a genuine cooperative model, I guess it ought to be looked at. But it seems to me that what has been happening in the UK could not, in any sense, be seen as a genuine mutual cooperative. Is that right?

Ms Batt : That is correct. From a lot of the research that we have done with UNISON, which is the British public sector union, and from also having some discussions with AFSCME in America, there have been a number of examples, as my colleague from the PSU group indicated, of attempts to set them up, particularly from 2010. The majority of them have failed or have faltered in relation to service delivery. A lot of the focus has been on the National Health System and the capacity to try and outsource aspects of that, without using 'outsourcing' or 'privatisation' as a term but using 'public service mutual' as a term so that it is a lot less stark in its application, particularly in the UK.

Senator XENOPHON: It is fuzzy.

Ms Batt : Absolutely.

ACTING CHAIR: Which is part of the issue at the other end.

Ms Batt : That is right, because it softens the perception of what is occurring. I went and got some examples, as was indicated by my colleague. If you are interested in having a look at ones that have been set up and have failed, Hinchingbrooke Hospital—

Senator XENOPHON: Can you send us some details on that?

Ms Batt : Absolutely.

Senator XENOPHON: Send us some details of where you say it has not worked, and I think that the BCCM may want to put in some supplementary material.

ACTING CHAIR: I was actually going to ask BCCM to respond to this particular Hansard.

Ms Batt : Do you still want me to go through some of the examples?

Senator XENOPHON: Yes, please.

Ms Batt : So, Hinchingbrooke Hospital and Circle Holdings. Circle Health took over the running of an NHS district general hospital in November, 2011. Circle Health is a subsidiary controlled by Circle Holdings; it is a publicly listed company, and the majority of shares are held by a small handful of investors, including hedge funds. The Circle Health majority shareholder is Circle Holdings. So whilst Circle Health itself is a mutual by definition—it is half-owned by staff—the commentators gloss over the fact that is also half-owned by hedge fund managers.

Senator XENOPHON: Who controls it, though?

Ms Batt : It is split, and the hedge fund managers put a profit motive on the operation of the hospital.

Senator XENOPHON: Surely there has to be someone who has the upper hand?

Ms Batt : The hedge fund managers.

Senator XENOPHON: So the control is ultimately with the hedge fund if there is a dispute?

Ms Batt : It no longer operates.

Senator XENOPHON: What do you mean?

Ms Batt : The hospital has had to shut down. It got to the point where there were serious concerns about the quality of care as they were further reducing the services and the types of staff who were able to deliver the care in this hospital. In January 2015, quite recently, Circle Holdings announced its plan to withdraw completely from its contract hours as a result of the Care Quality Commission inspectors coming in—an entity which has been set up. They had recommended that the hospital be placed on what is known as 'special measures' because of inadequacy of care.

Senator XENOPHON: Where is this hospital?

Ms Batt : Hinchinbrook, in the UK. I am not sure what shire it is in.

Senator XENOPHON: So are the doors still shut?

Ms Batt : It says in my briefing notes that the Care Quality Commission highlighted significant failings including delays in relieving patient pain, major problems in its accident and emergency department, incidences of patients left without call bells or drinks within reach and a lack of paediatric care left children potentially unsafe at times. My notes say that the hospital's future is uncertain and there are discussions about the NHS picking it up, bringing it back in. Therefore, there are some issues in relation to that model.

Senator XENOPHON: Can you acknowledge—again, this is not on my radar, this whole issue of public service mutuals. I suppose I have a jaundiced view about job networks, having spoken to employees of job networks who have told me some pretty horrific stories and you are aware of the expo. I look forward to your report. When is that coming out?

Ms Batt : I think it is coming out fairly soon, in the next couple of weeks.

Senator XENOPHON: I am sure you will send a copy to my office.

Ms Batt : I will now, absolutely.

Senator XENOPHON: I would like to read it. What happens if it is for a particular hospital, say—and Hinchinbrook is an example of where things have gone wrong—where it will be run as a mutual or as a cooperative, with a proper funding agreement in place and you have, say, 90 per cent of the staff of that hospital, including the nurses, the doctors, the cleaners, all saying that they want to go down this path? I am just being a devil's advocate here.

Ms Batt : I am just looking at the various other hospitals that have all collapsed after all of those things being put in place at the first time and where there was a genuine staff vote to 'spin out', as it is called, from the general public service and to operate as a mutual. Then part of that problems arise from the fact that there are no guarantees from the government in the UK for funding beyond the first three years of the spun-out entity. So we have not only Hinchinbrook but also Central Surrey Health has ceased providing services as a result of the loss of a contract in 2011.

Senator XENOPHON: I am sorry to interrupt but is the risk that, if a government wants to offload their responsibilities, they outsource their responsibilities by saying it is all in the hands of this whiz-bank cooperative but unless there is a genuine long-term statutory guarantee of the funding model, you are pretty much on your own at the end of that funding period?

Ms Batt : Pretty much.

Dr v an Barneveld : There are a lot of set-up costs as well. So they have to transfer the assets out of the public service. There are instances where assets—I cannot tell you where, though—have been transferred to the entity for a dollar and those become—

Senator XENOPHON: Or a pound in this case.

Dr v an Barneveld : No, because I am actually thinking it is in the Australian circumstance with the example of Australian Unity in New South Wales taking over home care services.

Senator XENOPHON: So it actually takes it away. One view is that it might be a way for politicians to outsource responsibilities.

Ms Batt : No politician can outsource their responsibility when it comes to the ballot box.

Senator XENOPHON: No, but in the short term a government.

Ms Batt : A government may think that they can but at the end of the day when a hospital does not work, a school does not work, a prison is overcrowded and there is violence in it, where do they look? They do not look to the company that is delivering the service or to the construct of the financial model; they blame the government of the day. We only have to look at what has occurred in Victoria in relation to public transport. Public transport is wholly privatised here but the blame was being sheeted home to the Victorian government when the dispute was on recently. So it is an issue that governments cannot privatise—

Senator XENOPHON: I love elections, by the way, Ms Batt. We should have more of them.

Ms Batt : Really, Senator? For the record, there are some other areas. NHS Wandsworth and Secure Healthcare was providing services to a number of prisons. It was a staff-owned social enterprise providing NHS to prisoners, but went bust in 2009 with one million pounds in debt. So once you take away the cross-subsidisation of government funding for various programs, you start to see the real cost of the delivery of these services using this model; therefore, you either start to cut back on the quality of care, such as in Hinchingbrooke, or you cannot continue to operate, so the service starts to close down completely.

Senator XENOPHON: Isn't the challenge how do you deliver services more effectively and efficiently? That is the challenge, isn't it—how do you get the best possible outcome at the lowest cost—and that can still be done within a public service. I am not talking about cost cutting necessarily, but how do you do things efficiently—there is no issue with that.

Ms Batt : That is exactly right. The public service union in Victoria and around Australia has no qualms with efficiency in the delivery of public services. But the efficiency that is debated is always the lowest common denominator.

Senator XENOPHON: No, I was not suggesting that.

Ms Batt : No, I am saying that this is the public debate that is occurring—private is good, public is bad. The reality is there is no discussion about applying an innovation model to the delivery of public services within a government. It is simply about privatising it or setting it up as an impact investing model, such as social impact bonds, or looking at public service mutuals.

Senator XENOPHON: Explain social impact bonds to me.

Ms Batt : Social impact bonds are the newest thing coming out of the G8. They focus on impact investing. So the government contracts with a provider or a philanthropic organisation or a merchant bank, and they then have a head contract that they then subcontract out to someone else to deliver the services. It is a two-stage removed delivery of services that is also causing major issues in the UK and the US for the delivery of services. Some small examples are being trialled in Australia at the moment. One is in Newpin in New South Wales, and I believe the South Australian government is looking at it for a health component. There are some very real concerns around this model.

Senator XENOPHON: Can you send us some more material about the social impact bonds, because they sort of dovetail into this.

Ms Batt : Yes, it does.

Dr van Barneveld : It does a bit. What happens with social impact bonds is effectively the government says, 'We want this particular service provided, and we want to see whether or not it can be more efficiently provided outside the public service.' With the Newpin one, that is about reducing the number of children who stay in foster care and get placed back with their families. UnitingCare Burnside entered into a trial with the New South Wales government to run it. They got a significant amount of money, and they have, according to the New South Wales government, provided a return on the first stage. So investors get a return from government of seven per cent on the basis of Newpin actually meeting particular targets, and those targets are: fewer children remaining in foster care, but going back to their families.

We do not cover those particular workers, but we have been watching it with interest and questions and issues around that sort of thing for us are: it is a trial where the targets have been set, in our view, reasonably low, so they are easily met in order to prove the success of the trial; also, there is no comparator. The government did not say, 'We will fund you, UnitingCare Burnside, to deliver this, and we will have a comparator in the public service where we will fund the public service to actually do the same thing and see whether or not there's a difference.'

Senator XENOPHON: You would have thought that they should give the public service the opportunity to say: 'How can you restructure things? How can you do it more efficiently? Is there a different way of doing this?' You are not given that opportunity.

Dr van Barneveld : No, but this was originally run by Burnside. They had just lost their funding.

ACTING CHAIR: Burnside is located where?

Dr van Barneveld : In New South Wales. UnitingCare were running it. They were losing their funding. They agreed to enter into this trial with the New South Wales government in order to save their program, effectively. The New South Wales government did not set up a comparator, which would have been to give $60 million or however much it was to the public service to see if it could be done similarly. It is really hard. The initial reports are that the first stage was a success and investors potentially got paid a return—but a success based on what?

Ms Batt : The University of Adelaide has just completed a major piece of research on all of what they call impact investing models around the world, and has looked at a number of issues that arise because of this model. I am more than happy to make that available to you as well.

Senator XENOPHON: Who did that out of Adelaide uni?

Ms Batt : Off the top of my head, I cannot remember the name. It was a joint arrangement with the European social services—

Senator XENOPHON: Can you provide that to the committee as well?

Ms Batt : Yes, I am more than happy to send it to you.

Senator XENOPHON: And you are saying that the picture is not so rosy?

Ms Batt : It is not rosy at all.

ACTING CHAIR: I think BCCM also acknowledged there were lessons to learn from the UK model. Given that there are lessons to be learnt, and that you seem quite au fait with the issues, what were those lessons and how can we work towards a model where cooperatives and mutuals are able to partner in the delivery of public service?

Dr van Barneveld : Broadly, in our view, we actually do not agree with that proposition.

ACTING CHAIR: Sorry?

Dr van Barneveld : We do not agree with that proposition at all. We do not believe that cooperatives and mutuals are the right model to deliver what should be delivered by government.

ACTING CHAIR: In a more—

Senator XENOPHON: Sorry, can I ask—

ACTING CHAIR: Yes, sure.

Senator XENOPHON: Sorry. Is that an—sorry, I am just trying to test that—

ACTING CHAIR: Maybe there is a cultural prejudice.

Senator XENOPHON: No, no. I did not say that, Chair. I did not say that.

ACTING CHAIR: Well, I did.

Senator XENOPHON: I am just trying to understand why—

Dr van Barneveld : Because there are plenty of examples that—

Senator XENOPHON: You may have a cultural prejudice, Chair.

ACTING CHAIR: Sorry. Ms van Barneveld is trying to answer the question.

Senator XENOPHON: You may have a cultural prejudice, Chair.

ACTING CHAIR: I have several.

Senator XENOPHON: At least you admit it.

Dr van Barneveld : Because there are plenty of examples that demonstrate that, in fact, they are more costly in terms of set up. In effect, they are actually—and the UK government has acknowledged this—privatisation. So, in our view, let's just call a spade a spade. If there is a proposal to privatise government services, then let's say that it is about privatising government services and talk about it that way rather than set up organisations which, the evidence is showing, are failing on the whole where they have been used in the UK. They end up either costing the government more by virtue of paying off debt or writing off debt of these organisations and then purchasing them back, or stopping the delivery of a service. We are also genuinely concerned about the decline in the quality of service provided to the public as a result of putting in these models.

ACTING CHAIR: In light of fiscal issues—budgetary concerns at the moment, and ongoing into the foreseeable future—when we talk about stopping services, it is a very real issue. If there is a model around that assists in the provision of public services in particular communities, why wouldn't we be looking at it? Rather than saying, 'Sorry, we can no longer afford that; we're not doing that anymore,' why wouldn't we be looking at models where we can actually partner with organisations in the community to deliver those public services?

Ms Batt : Part of the issue is that the majority of the entities that wish to partner in any form, whatever the construct of the contract, are not subject to the same accountability and governance issues that the public sector workforce is for the accountability and the transparency for the use of government money and for the requirements to meet certain social obligations in relation to the delivery of programs. The cost component, or the profit motive, becomes quite a focus on the delivery of those services, which is not an element of public sector service delivery.

ACTING CHAIR: And I appreciate that, Ms Batt. But, surely, those three things—and we have been discussing them ad nauseam in this committee, and there are many submissions around ensuring our current system—are things that we can actually change, in terms of the regulatory environment around how government money is treated. When you talk about social obligations, I encourage you to read the 58 submissions on this issue.

Ms Batt : I have read a number of them.

ACTING CHAIR: Social obligation has been a key factor driving cooperatives and social feedback. When you talk about the profit motive, again there are numerous examples of cooperatives and mutuals where profit is not the motive. If it is the motive, it is profit in the range of a variety—whether it is monetary gain or a whole variety of social gains delivered back to the members. For the three that you have picked, I would challenge you, given the evidence that the committee has heard over the last 24 hours from cooperatives and mutuals themselves about that difficult mix. In terms of the accountability stuff, I think that is about government getting the regulatory framework right.

Ms Batt : I think it is more than regulatory framework, with respect, Senator. I think it actually goes to a question of the same accountability measures. The same accountability measures are not there. If you look at the Departments of Health's and Department of Human Services' annual reports to parliament and the extreme detail that they go into for the purposes of providing an analysis of what money has come in and what money has been expended, the programs and the targets, and then you compare that to some of the not-for-profit organisations that also get government money, there is a significant difference in the amount of information that is provided to the general public about the use of government money.

ACTING CHAIR: I am suggesting, Ms Batt, that that is something government can change. The regulatory framework that people are required to report under is open to governments to change, is it not?

Ms Batt : It is open to governments to change, but that—

ACTING CHAIR: Right. So if it is an issue, then it can be changed. When we had BCCM talk about the lessons to be learned from the UK and I put the question, I got the answer that the CPSU fundamentally rejects the whole concept of cooperatives and mutuals having a role in the delivery of public service.

Ms Batt : Yes, we do.

ACTING CHAIR: Right. Do you feel the same about incorporated bodies delivering public services?

Ms Batt : In the context of what, companies limited by—

ACTING CHAIR: I am trying to think of just a regular company delivering a public service that you would outsource.

Ms Batt : We oppose that.

ACTING CHAIR: You oppose that. Do you oppose not-for-profit organisations delivering public services?

Ms Batt : Public services that are currently being delivered—

ACTING CHAIR: Does the CPSU oppose not-for-profit organisations delivering public services?

Ms Batt : Public services that are currently being delivered by people who are employed by government, yes. If there is a new and innovative service that has not been decided and not been done by government before and it is done in partnership with the government department that has responsibility for that area, we are happy to explore it, but the concept behind all of these principles is the outsourcing and the loss of our members' jobs and there are questions that we have in relation to the—

ACTING CHAIR: So it is not actually about the delivery of public service; it is about—

Ms Batt : Absolutely it is about the delivery. It is about the quality of care.

ACTING CHAIR: It is about employment of CPSU members and that is where we are not talking apples and apples here.

Ms Batt : It is about the quality of care. Let us look at some of the examples in Victoria. Let us look at the residential care issue for an area where it was privatised, given out to a not-for-profit and they were not prepared to put enough staff on. So kids were being pimped at local shopping centres for sex. There is an inquiry currently into that.

ACTING CHAIR: Was that a cooperative or a mutual?

Ms Batt : It was a not-for-profit organisation.

ACTING CHAIR: Was it a cooperative or a mutual, which are the subject of this inquiry.

Ms Batt : It was not-for-profit. You asked me question about not-for-profits.

ACTING CHAIR: No, I asked you a question—this inquiry deals with cooperatives and mutuals. You have stated that outside of employed public service members you do not agree with any organisation in the Australian community being contracted to deliver public services, and that is fine.

Ms Batt : At the expense of our members' jobs, that is right.

ACTING CHAIR: Does the CPSU recognise the strong employee credentials of cooperatives and mutuals?

Ms Batt : Yes, we do.

ACTING CHAIR: Excellent. So you think your members would be well served to be employed within cooperatives and mutuals more generally?

Ms Batt : We do not have coverage of cooperatives and mutuals.

ACTING CHAIR: I know you do not. Your members, should they choose to deliver public services within a cooperative or mutual structure rather than through the direct employment of the government?

Ms Batt : If under the model that is supposed to apply staff are given an opportunity to vote on it, that would be something they would then make a decision on, but the models that are occurring—

ACTING CHAIR: And you would back their right to make that decision?

Ms Batt : Absolutely.

ACTING CHAIR: And you would back the decision they make?

Ms Batt : Absolutely because it is a fully informed decision, but what is occurring at the moment is that, when they are finally allowed to go to ballot, they are voting down the proposal to go to a mutual in the UK.

Senator XENOPHON: Do they need a minimum of 90 per cent?

Ms Batt : In the ballot in West Essex—and I am not quite sure for what function—1,000 staff were balloted, 70 per cent turned out, 73.7 per cent said no, that they were not prepared to spin-out the service.

Dr v an Barneveld : With the Cleveland Fire Brigade it was 97 per cent. There are not many employees, I would have thought, who would be willing to step out of the public service and to put their livelihoods effectively at risk by virtue of investing their livelihoods in a public service mutual. I think that the high lack of exit rate in the UK is an example. When they announced these things, they thought they were going to get a million public servants by this year—

Senator XENOPHON: It is 35,000 now.

Dr v an Barneveld : Yes. So they did not get there.

Senator XENOPHON: Can I ask a broader question. It follows Senator McKenzie's line of questioning. For the record, I was not impressed with the privatisation of Medibank Private. I thought it was good to have a publicly owned insurer as a bulwark in a sense. I have nothing against private insurance. I am a member of one but I thought it was a good thing to have one of those as a counterpoint. Many years ago, in the South Australian parliament, I opposed the privatisation of electricity assets because I thought that was an essential service. But, in times gone by, the South Australian government used to own a laundry service—which I do not think they own now. A laundry service—washing sheets and towels. Is that a public service? For the record, Dr van Barneveld is laughing!

Dr van Barneveld : That is a really tricky question.

Senator XENOPHON: I was not trying to be tricky.

Dr van Barneveld : What is defined as a public service? Those ancillary activities you are referring to that government has done do not exist—

Senator XENOPHON: A laundry service, a travel agency—and there are a lot of other examples that have been state owned in the past. Is that appropriate?

Dr van Barneveld : The other question is: what is the purpose of those things? If it was a laundry service that was employing the most vulnerable people in Australia—who are not going to be picked up by a full-profit model—

Senator XENOPHON: That was not the case in the South Australian laundry service.

Dr van Barneveld : then maybe the government does need to step in and provide that assistance to those people. One of our very real fears is that if you start to privatise these things it is the most vulnerable—

ACTING CHAIR: We do not call it privatisation. You have an issue with definitions and we have an issue with definitions. It is about partnering with co-ops and mutuals; it is not about privatisation.

Dr van Barneveld : I think we will need to differ on that point.

Senator XENOPHON: I guess there is the definition of what a public service is. From the American example, I am nervous about privatised prisons. But I do not see a role for government being involved in a travel agency or a linen service. I think it was called the South Australian Linen Service—I cannot remember whether it was 'laundry' or 'linen'. It was a state owned enterprise. What is the core definition of a public service organisation? I may differ from the chair on this, but I think for job networks there is a strong public element in the policy. I know that, with great irony, some people have done very well out of that in the UK—and one very well-known Australian did very well out of privatised employment services in the UK. What do you define as a public service?

Ms Batt : Can I give you the definition that has been used in the UK discussions around their open paper?

Senator XENOPHON: Sure. But what is your definition?

ACTING CHAIR: What is the CPSU's definition?

Ms Batt : The CPSU's definition adopts this. We have had discussions within our organisation about this. It says: 'Public services are not a discretionary commodity. They are public goods that provide benefits to both individual service users and the wider society. CPSU believes that the founding principles of public services—namely, universal access, delivery according to need, services free at the point of use and services delivered for the public good rather than for profit—should be at the heart of model service delivery. It is our view that through its democratic abilities, unique funding mechanisms and long-term integrated approach, the public sector is best placed to provide public services that meet those criteria.'

Senator XENOPHON: So the first part of the definition is that these are non-discretionary goods or services?

Ms Batt : No, it does not even go into that. It talks about universal access and delivering according to need. A number of those program issues are about why the public service was set up in the first place, to meet what need, and who was to have universal access to it rather than paying for it.

Senator XENOPHON: But is electricity universal access?

Ms Batt : It may be in some states, but it may not be in others.

Senator XENOPHON: I am not asking whether it is in some states. I happen to believe that it is an essential service.

Ms Batt : I believe it is an essential service. I believe water is an essential service. I believe gas is an essential service. I believe the issue of locking up the state's citizen should be held by the government, not by the provider.

Senator XENOPHON: But you know the gas market has gone to crap, don't you?

Ms Batt : Possibly. I focus on public services rather than gas.

Senator XENOPHON: I am just saying that the market—

Ms Batt : Sometimes it gets it wrong; the market is not a living, breathing beast. So there are issues for us. And part of the debate that is emerging around social services is the push to have the concept of a mutual model—and we said we have some questions about the definition that is being applied—which is about moving into what we would say are the very core services that the state or government should provide. That is around child welfare, public housing and criminal justice. Some of those issues should not be picked off for profit. That is fundamentally what we looked at.

Senator XENOPHON: And I suggest that it might be worthwhile sitting down and talking to BCCM. Somehow, I think your positions may not be that different.

ACTING CHAIR: Exactly. I think there is a misunderstanding of what a co-operative or a mutual is.

Senator XENOPHON: I was not saying that.

ACTING CHAIR: I know you are not saying that. I thought you had finished.

Senator XENOPHON: Yes, I am finished.

ACTING CHAIR: Okay. My understanding from listening to co-operative and mutuals is that they can be for profit or not for profit and that everything they do is for the benefit of their members.

Ms Batt : That is our understanding of what a traditionally operating mutual or co-operative is.

ACTING CHAIR: But everything you have spoken about is a privatisation/for-profit conversation, which is not what we have been hearing from the co-ops and mutuals over the last day.

Ms Batt : I accept that. But part of what is being discussed out of the UK experience is that the term 'public service mutual' is being used as a coverall for the privatisation of government services, predominantly in the NHS.

ACTING CHAIR: Okay, I think you have made your position clear. Thank you.