Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The Harvard philosopher Michael Sandel once said that he was for a market economy but not for a market society. I think that is a good way of characterising the differences between the two sides of the House on the question of privatisation. The perspective of the Liberal and National parties has always been a theological belief in the value of privatisation. Those on that side of the House believe in a market society. They believe that inherently privatisation is always good.

Those of us on this side of the House take a much more pragmatic view to privatisation. It was the Hawke government that privatised Qantas and the Commonwealth Bank, but it has also been Labor which has stood up against bad privatisations. We have to admit in a debate like this that there is such a thing as a bad privatisation. Privatisation of the British rail network is a classic example, a privatisation which ended up with consumers bearing higher prices and getting inferior services. So when we are considering privatisations, it must be on a case-by-case basis. Yes, we should look at the revenue that flows from privatisation but we also need to consider the situation of the asset. Is it a natural monopoly? Is it the kind of thing where there is going to be contestability in the market? Is the asset itself a natural role for government or is it something where we might expect the private sector to get more efficiencies? These are the questions that this side of the House asks on an issue like privatisation.

At the heart of this Asset Recycling Fund Bill is the notion that an incentive payment of around 15 per cent of the value of the asset multiplied by the share of that sale price that is invested by this state into certain other assets should be returned to the state as an incentive payment. But as a number of University of Queensland economists, Flavio Menezes and John Quiggin chief among them, have highlighted, it is quite unclear whether this incentive payment is of appropriate size. One of the things it depends on is whether companies are in fact going to pay company tax revenue which is of that scale.

Let me step back for a moment. The notion of paying an incentive payment has at its heart the principle that a government entity does not pay company tax. Once the asset is sold to private investors, they begin to pay company tax. The Commonwealth gets company tax and returns a portion of that to the state. But that argument only holds if the company actually pays a reasonable rate of tax. If it has very large deductions, and we have seen some of the potential loopholes in the company tax system arising in the debate over the base erosion and profit shifting, then it is not going to be the case that the Commonwealth gain in company tax is 15 per cent of the sale price of the asset. We need to be very clear that this is only a very small share of what states have had ripped away from them by this Commonwealth government—$80 billion ripped out of schools and hospitals as a result of this latest budget—and it will be a very small share of that which states see returned to them in the form of this incentive payment.

The idea of an incentive payment is not new. It has been floating around in the ether of Treasury and Finance for nigh on two decades just waiting for a buyer. The idea found a gullible buyer in the form of the Prime Minister and the Treasurer who, when they walked into office, bought an idea which had been considered and rejected by the Keating government, the Howard government, the Rudd government and the Gillard government. So you cannot help thinking that the Abbott government is somewhere in the position of someone who finds themselves having inadvertently purchased the Sydney Harbour Bridge. They have bought an idea which so many others had rejected. And the reason they have bought this idea goes back to that Michael Sandel distinction between a market economy and a market society.

If you believe in a market society, if you believe that the private sector always does things better than the public sector, then invariably you are going to be tempted to pay states to privatise. But if you take a more pragmatic approach to privatisations, as we on this side of the House do, then I think you are much more likely to be sceptical of privatisations, to want to see the business case for a privatisation, to take the view that if it does not stack up on its own merits then the federal government should not be paying the states to privatise an asset that they would not otherwise have privatised.

Debate interrupted.

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