Chris Bowen (Prospect, Australian Labor Party) Share this | Hansard source

When a government want to sell a publicly owned authority, they need to make the case. They need to make the case to the public as to why it is necessary or beneficial that that organisation be privatised. They need to explain to the shareholders—that is, the public—why that particular public administration should be in private hands. The government has miserably failed to make the case in this instance.

There are a number of justifications that can be used for particular privatisations. Sometimes the rationale for government ownership has disappeared—sometimes the reasons that an organisation was placed into government ownership have disappeared as the world has changed. Sometimes the entity requires a capital injection, and it is not fair to require taxpayers to make that capital injection. Neither of these reasons applies in this case.

Let us have a look at the government’s attempts at justification. The government has said that the privatisation of Medibank Private is necessary to drive down management costs and to introduce private sector efficiencies. But this justification is particularly thin. The management expenses for Medibank Private as a percentage of member contributions are 9.2 per cent. The industry average is 9.5 per cent. The relevant figure for NBF is 10 per cent, for NIB it is 11.8 per cent and for MBF it is 9.3 per cent. It is true to say that for Australia’s largest for-profit medical insurer, BUPA, the relevant figure is 7.7 per cent. I acknowledge that. However, BUPA also has less success in retaining members, has received more complaints about service and has a lower percentage of benefits paid to members as a percentage of contributions than does Medibank Private.

It is very easy to get your management costs down if you provide an organisation or service of lower quality. Of Australia’s four for-profit health funds, each one has higher premiums than Medibank Private. This argument is so thin it is risible. The government says it has a report to justify this claim, the Carnegie Wylie report, a report sitting on the desk of the Minister for Finance and Administration. It is not one he will share with this House, not one he will share with the other house, not one he will share with Medibank Private members and not one he will share with taxpayers. He has kept it on his desk and it is impossible to test the veracity of that report when this government insists on keeping it secret, but all the evidence is that the government’s argument is absolutely ridiculous.

The government also says that it has a conflict of interest in owning Australia’s largest health insurer while being the regulator. But it has not been able to provide one single instance over the last 10 years where this conflict of interest has arisen or caused it a difficulty. The government dealt with this conflict of interest back in—I think it was—2003 when it made the minister for finance the shareholder of MBF, while the minister for health is the regulator. Governments do this all the time, state governments in particular—they keep the organisation in public ownership but separate the ministerial responsibility for ownership and regulation. It has been happening for years. It does not appear to have caused the government too much grief in the last 10 years. Of course, if it is such a big issue the government will be moving to privatise Australia Post any day because the same exact issue arises in relation to postal services.

Some on the other side have used the argument that Medibank Private needs to be privatised to give it the full ability to act as a private instrumentality, so that it would have access to private sector capital. This argument is also particularly thin. The Parliamentary Library, which the honourable member for Hotham referred to, deals with this argument in its Bills Digest. It says:

A publicly listed Medibank Private would not have any more freedom under the Act and regulations than it has under its current ownership arrangements.

That has been supported by the chief executive of Medibank Private. Equally ridiculous is the argument that Medibank Private needs an injection of capital and that taxpayers should not be required to contribute that capital. That is an argument which has been put in this House, it is an argument that Senator Barnett in the other house has made publicly and it can be, in some instances, a very powerful argument. It was in Qantas, for example, where a massive injection of capital was needed to keep the organisation afloat. When taxpayers are given the choice of whether to put the money into this instrumentality or direct it to services such as health and education, most taxpayers would not have any difficulty in saying that it should go into health or education. It is a particularly irrelevant argument in this case.

Medibank Private has not gone to the government and asked for capital. Medibank Private does not need capital to stay afloat. Medibank Private does not need a massive injection of funds to undertake modernisation. In fact, in 30 years of existence Medibank Private has had just three injections of capital. There was one in 1976, which was an injection of $10 million to establish the fund in the first place and which was fully repaid to the government. There was another in 1978, again $11 million of establishment grants, which was mainly to reimburse Medibank Private for expenditure it had undertaken. Again, in 2005 there was $85 million to increase its capital to better reflect its market share. So no case has been made to say that an increase in capital is needed and therefore those funds should come from the share market and not from taxpayers.

We have heard the argument from honourable members on the other side, when they were still choosing to make a contribution to this debate before their speakers’ list ran out, that this privatisation is necessary to fund medical research—that the funds from the privatisation will go into medical research. What an insult to say that the only way we can fund medical research, with the largest budget surplus in this nation’s history, is to sell off a public body. What an insult to our intelligence. What an insult to say to medical researchers and people relying on medical research, ‘The only way we can answer your claims for funding priority is to sell an instrumentality which has been owned by taxpayers for the last 30 years.’ It is a disgrace to the parliament that that insult was even raised by members opposite.

Having established that there is very little reason to proceed with this privatisation, it is necessary to examine some of the potential ramifications. The first is that the government is leaving the taxpayer open to potential compensation for policyholders. The government has tabled legal advice from Blake Dawson Waldron that there would be no case for compensation for Medibank Private policyholders. The Parliamentary Library has issued, I would say, an unusually strongly wordedBills Digest which not only questions the advice but rebuts it. I do not pretend to adjudicate between those two pieces of advice, I do not pretend to be in a position to do so; I suspect that one day the courts will do so. But there are views very strongly held on each side and the government would want to have very good reasons for taking the risk of opening the taxpayer up to compensation on such a large scale. If the government wants to take a calculated risk that it is going to open the taxpayer up to this potential compensation then you would want it to have a very good public policy ground to do it, but it does not. It has no good reason to go down this road and it arrogantly rejects any advice which does not suit its political circumstances.

People who have health insurance will want to know what the impact of this privatisation will be on the health insurance market and on their premiums. It is fair to say that the effects will be complex and they are not necessarily all known, but we can be sure that they will be significant. Medibank Private is Australia’s largest health insurer. It covers 29 per cent of the market. It is the largest private health insurer in New South Wales, the ACT, Victoria and the Northern Territory, and it is the second largest insurer in the other states. So its privatisation will certainly be felt. Standard and Poor’s said so. They said that the privatisation of Medibank Private would be ‘likely to materially affect the competitive dynamics of the industry’. It stands to reason that that would be the case when you have the largest provider of a particular service changing ownership in such a dramatic way.

The Fraser government kept Medibank Private in public hands to promote competition, because they did not feel that having a private entity liable for takeover would be in the best interests of the Australian people. Nothing has changed since Malcolm Fraser’s government took that decision 30 years ago on that argument. Thankfully, the government have now decided to proceed with a stock market float as opposed to a trade sale. They originally were going to bring this legislation in and say in a typically arrogant and high-handed manner, ‘We’re going to sell Medibank Private. We are not going to tell you whether it will be a trade float or a stock market float until after the election, but we just want the authority to do that.’ Thankfully, they have changed their approach and have now said it will be a stock market sale, which means that Medibank Private will not, in the first instance, be taken over by another fund. But the restrictions on ownership apply for only five years. The government is legislating that no organisation will be able to take more than 15 per cent of Medibank Private, but this is grandfathered for five years. In five years time, we could see Medibank Private collapsed into another fund. And, of course, Medibank Private will now have a profit motive instead of being a not-for-profit fund. So there is the potential for Medibank Private to be merged with another fund, for the competitive pressure to therefore be taken out of the private health insurance market and, by definition, Medibank Private will now be for profit instead of not for profit.

The government says that this will put downward pressure on premiums, but it does so without any possible justification, rationale or explanation. It comes in here and says, ‘Isn’t the private sector wonderful. If we could just get the bureaucrats out of Medibank Private and install a private sector ethic, then they would be able to put that downward pressure on premiums.’ But the government provides no rational explanation for that and the figures do not back it up—and this is from a government which promised in 2001 to reduce private health insurance premiums and since that time has presided over an increase in private health insurance premiums of 40 per cent. Members of the public have a right to be concerned when they hear this government promising anything on private health insurance.

The arguments for this privatisation are particularly thin. Privatisations can, at times, be necessary. This one represents bad policy and bad economics. It is driven purely by ideology. There is no other possible explanation. This government’s extreme right-wing ideology is being exposed again. As such, it has to be opposed. Not only do Medibank Private health insurance holders need it to be opposed but also every holder of private health insurance in this country needs it to be opposed. The Labor Party will oppose it and we will be making this a key issue in the next election campaign.

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