Privatisation deals promise an increase in efficiency. Applied to the public transport service in Malta, does this promise hold any water?
by Joseph Abela
Collage by Isles of the Left
During the PN administrations of Fenech Adami and Gonzi a string of privatisation deals was carried out whereby various public assets were sold to private companies. The rationale behind these type of deals was that the private sector is better equipped to efficiently administer these assets. Under Muscat’s tenure, another type of privatisation has become commonplace—the public-private partnership. A controversial example of the latter was the public-private partnership in the healthcare system which outsourced running of St Luke’s, Karen Grech and Gozo hospitals to private companies.
But is giving control of our public assets to private companies really the best choice?
Privatisation of Malta Public Transport: Success or Failure?
One of the biggest privatisation projects in Malta in the last decade dealt with the public transportation service. In 2011 Austin Gatt, then Minister for Infrastructure, Transport and Communications, handed the public transport service over to Arriva.
Before Arriva, public transport was managed by the Public Transport Association, which operated on a co-operative model. At the time, the service was reliable and drivers’ working conditions were much better. The drivers managed the service themselves and distributed revenue between them.
While prior to privatisation a single trip was worth 48 cents, after that, a price of the two hour ticket jumped up to 1.30 euro for the Maltese residents and to 2.20 euro for everyone else.
The most significant upgrade by Arriva was a new fleet of buses whose advantages were a higher degree of comfort and fewer emissions. However, the service itself was grossly inefficient. Users complained about problems with the routes and the lack of time-keeping. The number of accidents involving buses increased: they routinely caught fire, and crashed, leaving a number of passengers injured. The cost of this poor—even hazardous—service was much higher compared to the previous system: while prior to privatisation a single trip was worth 48 cents, after that, the price of the two hour ticket jumped up to 1.30 euro for the Maltese residents and to 2.20 euro for everyone else.
Arriva didn’t last long. On 1 January 2014 a Government company called Malta Public Transport Services Limited took over, only to be succeeded by another private company, Autobuses de Leon, in January 2015. Admittedly, there have been improvements, yet the service still remains inefficient when compared to the days public transport was administered by the co-operative.
Although privatisation deals promise an increase in efficiency, the case of Malta’s public transport proves the opposite: the quality of the service has plummeted.
Over the course of the public transport privatisation, the government ended up paying 27 million euro more in subsidies annually.
Another argument in favour of privatisation is that government expenditure will decrease. Does it hold any water? Prior to 2011, the service was also subsidised by the state: In 2008 the subsidy amounted to 1.5 million euro (worth 1.7 million euro in 2016 due to inflation), and that is much less than the 29 million euro worth of funds to the current public transport operator in 2016. Hence, over the course of the public transport privatisation, the government ended up paying 27 million euro more in subsidies annually.
The inferior service is not the only flaw of privatisation. Free-market evangelists argue that monopolies only exist when public utilities are controlled by a single governmental entity. However, monopolies can also emerge in the free market environment. Such was the case of the railway service in the UK, where Richard Branson monopolised the train service of certain regions. In the first 4 years of private control alone, Branson and his associates raised fares up to 70%. In addition, the service was rather poor; the Virgin and Stagecoach drove the railway to financial collapse. Thus, decision to renationalise the East Coast train service was a certainly a positive step by the British government.
Alternatives to Privatisation?
Is renationalising public assets the only way to ensure quality service and democratic control? Certainly, there are more options to consider and a workers’ co-operative is one of them.
In order to enable co-operatives to compete with big private companies, the Labour Party in the UK proposed a Right to Own policy. It allows workers to be the first buyers of a company, if it is being dissolved or sold. Collectively, the workers will have the know-how of day-to-day operation and will be able to keep the company running. In the long term, the workers will have direct control over how profits are distributed. Tony Benn, in his book ‘Arguments for Socialism’, promotes these ideas, arguing that “there is no reason whatever why government, … cannot cut short the long process of learning industrial management by providing skill on contract to those [co-operatives] who are confronted with these problems.”
This model can and should be applied to the public assets too. Instead of bailing out private companies that mismanage public assets or spending exuberant amounts on subsidies, giving control to the workers will be a much more productive investment.
The Maltese government has recently launched a scheme designed to help newly formed co-operatives in the financial and management aspects.
Although, at the moment, not many local cooperatives have the resources or expertise to manage public assets by themselves, with sufficient support from the government, such initiatives can emerge. The Maltese government has recently launched a scheme, designed to help the newly formed co-operatives in the financial and management aspects. Although it is intended on a relatively small scale, this scheme has a potential. By helping in management, the government ensures that the co-operative will be able to sustain itself over a long period of time. Having said that, the state needs to support the co-operatives further, especially when it comes to raising the initial capital.
An example of a successful public transport co-operative model on a larger scale is the school transport operated by Coop services. The Ministry for Education and school transport operators have reached an agreement to provide this service to the students for free. This further proves the point that the co-operative model is suitable to deliver quality service to the end-user, even on a large scale. In fact, Coop services provides transport for 20,000 students daily.[*]
We should no longer accept the false mantra of the superior quality and higher efficiency that the private sector is expected to deliver.
In the 21st century we should no longer accept the false mantra of the superior quality and higher efficiency that the private sector is expected to deliver. Moreover, the Left has an answer to the accusations, hurled by the liberal Center and the Right, in advocating the total state control over the national economy. Although acknowledging that the state still remains an important player in governing public assets (since it is able to see the bigger picture), we need to emphasise the successful methods of decentralized public ownership.
By gaining a say in governance, workers and general public can take our public assets and services to the next level.
[*] This paragraph was included later on due to feedback received from our readers.