Unity within the Australian Labor Party can lead to great things. During last year’s election campaign, disputes within Labor’s parliamentary and organisational wings, trade union affiliates, local branches and even factions were suspended. As a participant in some of these disputes in the past, it was good to see the result of everyone pulling in the same direction – the Rudd Government.
Alas, after the November poll, the incentive to co-operate receded and less than three weeks later conflict erupted over the electricity privatisation plans of the NSW Labor Government under Morris Iemma.
In essence, those plans are to lease out to the private sector the State’s power stations, all of which are currently Government owned, although two have already been leased out. The Iemma Government also intends to sell off the retail arms of the electricity industry, which it also owns, but retain the "poles and wires" – the grid itself.
NSW Treasurer Michael Costa argues that this is necessary to avoid the State having to bear the cost of a new baseload power station which he says will be needed by approximately 2014. His argument goes that if the generators are (partially) privatised, a new market for electricity generation will be created and with it the incentive for the private sector to fund, build and operate the new power station.
Some of the Government’s critics argue that there will be no net economic benefit in the sale and with the adoption of appropriate energy efficiency measures, a new baseload power station will not be necessary until 2020 or later. Perhaps the principal critic is Bernie Riordan, the Secretary of the Electrical Trades Union, who is also NSW Labor’s President. Among other things, he is worried about the jobs of his members under new, private sector management. Any job losses would also affect his union.
The Government disputes that economic benefits will not accrue to the State and has attempted to counter the unions’ argument by pointing out that in Victoria, where the whole industry was privatised some years ago, staffing ratios under privatised generation are now roughly the same as in the NSW power industry. The Iemma Government has also promised to guarantee the jobs of the workers affected, and to further sweeten the deal by offering compensation averaging $40,000 to the affected workers, even though their jobs are to be secured.
So why all the heat of recent weeks between the Government and the unions?
Partly it is a matter of process. NSW Labor party policy, often referred to as "the Platform", says that a privatisation proposal must be considered on a case by case basis. It prescribes that the Government appoint a committee to prepare an impact statement on any proposal, guided by 12 separate criteria. These criteria were added to the Platform some years ago after lengthy negotiations between various stakeholders. Part of the problem is that the Government announced its decision before the committee had even met to consider the matter.
The unions and the Party’s local branches, which are traditionally suspicious of privatisation proposals, were unimpressed by this, particularly after both groups worked hard to re-elect the Iemma Government in March last year, and even harder in the lead up to Federal Labor’s victory in November. Branch and union activists now claim a greater degree of ownership of the Party and its direction, because of that heavy and vital commitment.
The dispute has been worsened by personality clashes between the major participants. Costa, the Trostskyite turned Labor right-winger, would concede that he is not a natural diplomat. He occupies a role once filled by Paul Keating in the federal sphere – that of policy battering ram. As such he seems unaffected by his former role as Secretary of Unions NSW before entering Parliament.
Riordan on the other hand, is the son of Joe Riordan, a respected Whitlam Government Minister and former union Secretary. Bernie has been steeped in Labor politics all his life. He knows that both the NSW and Federal Labor Governments needed and received the strongest support of the trade unions and branches last year and he is determined to ensure that their views are not ignored in this debate.
The Iemma Government has other concerns. One is the likely value of the State’s coal-fired power stations in 10 or 20 years time. If the proposed international carbon trading scheme has its intended effect, coal-fired electricity will become much less economic and therefore the value of those power stations may decline substantially in the medium to long term. Unless it divests itself of those assets now, the Government may lose its chance to extract real money from them.
A second concern is the financial position of the State of NSW. It was only in the last financial year that the revenue from the Goods and Services Tax passed on to the State by the Federal Government exceeded that expected from the State taxes abolished in 2000 when the GST was introduced. NSW has not had any significant GST windfall and the Howard Government ensured that none of the states shared in the enormous resources-boom revenues accruing to the Commonwealth over the same period.
Related to this is the highly elastic nature of revenues directly levied by the NSW Government. Almost two-thirds of these tax receipts comprise property transfer duties and land and payroll taxes which are heavily reliant on the level of economic activity, particularly of the property market. The NSW property market has gone off the boil over the last three years and although revenues have not declined as yet, there is a possibility they may decline very significantly with interest rates increasing, potentially stalling activity.
The Government is probably also worried that the expected transfusion of funds to the States from the Rudd Government will not materialise because of the need to maintain Federal surpluses to take the pressure off interest rates.
A final worry for the Iemma Government is the need for substantially increased capital spending in NSW. Critics, including the Property Council of Australia, have criticised the level of infrastructure spending in NSW over the last half century under all governments. The Iemma Government has made a fine start over the last two years with large increases in such expenditure, but with health, education and transport crying out for further public spending, depreciating assets like power stations are prime candidates for sale, if only to allow room for further infrastructure spending.
Both sides now await the impact statement from the committee considering the privatisation, headed by former Labor Premier Barrie Unsworth, and including MPs, trade union officials, environmentalist Jeff Angel, UnitingCare Director, Harry Herbert and two of the State’s most senior public servants.
Meanwhile, NSW Labor’s Finance and Economic Policy Committee, which I chair, is shortly to deal with resolutions from party branches on the issue, almost all of which, I predict, will oppose the sell-off. Our committee will report on the issue to NSW Labor’s Annual Conference in May and we are not sure we are looking forward to it!
My view, which may or may not be shared by other committee members, is that the Government has adhered to party policy – albeit belatedly – by ensuring that the Unsworth Committee assesses the privatisation proposal. The Platform does not rule out privatisation in any industry and impliedly leaves the decision in a particular case up to the government, guided by the impact statement of its appointed committee.
It is not the role of our Policy Committee to make the Government’s decision for it, although we may express a view to the forthcoming Annual Conference, which may or may not adopt it.
If an Annual Conference resolution supports or opposes a privatisation proposal but does not change the Platform, it is not binding on the Government. In the present case, the Conference set the policy years ago and the Government has followed it.
The Party has no role in directing Executive Government action when the Government is acting consistently with the Platform. The Conference can hardly change policy retrospectively after the Government has made a policy-based decision. There is therefore no sense in expulsions, or sustained acrimony, by either side over this issue.
The Electrical Trades Union’s motto is Power is Unity. I prefer Unity is Power.
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