GOVERNMENT is involved in too much at present, Treasury Minister Eddie Teare MHK told Tynwald in his Budget speech – as he gave his strongest indication yet that he is in favour of specific public services being hived off to the private sector.
Tynwald last month approved Council of Ministers’ recommendations on plans to make government smaller, simpler and less bureaucratic.
All government departments, statutory boards and offices have been given until December 31 this year to review delivery of services and choose the most suitable option based on a sound business case and the needs of the public.
This followed last year’s updated independent report into the Scope of Government which recommended that certain public services be contracted out to external operators or ‘corporatised’ i.e. run on a more commercial basis by government-owned companies.
Wholesale privatisation is not on the agenda at this stage, however.
But beginning his Budget speech, Mr Teare said: ‘I believe it is fair to say that government is involved in too much at present, and as a result runs the risk of losing focus on the critical services upon which we all depend. We are going to have be much more vigorous in distinguishing between the vital and the “nice to have”.
‘For example, why does government run loss-making attractions without fully understanding their tourism benefit, and why does government run cinemas or loss-making restaurants and sawmills at all?
‘That is why we now need to reconsider, and act, on the Scope of Government report.’
Mr Teare said that reducing some services would inevitably provoke criticisms in Tynwald. Somewhat bizarrely, he quoted Deputy UK Prime Minister Nick Clegg who had spoken about the biggest divide in politics today being between those who offer leadership and those who only offer dissent.
‘I am, and will remain a leader rather than a dissenter, and we will see this job through,’ Mr Teare told the court.
‘Now is not the time to vacillate – further firm decisions and actions are required if we are to deal with the unprecedented pressures which we face.’
But the first shots across the bow over the controversial issue of part-priviatising public services have already been fired.
In Tynwald, Leonard Singer (Ramsey) accused Community, Culture and Leisure Minister Graham Cregeen and chief executive Nick Black of ‘scaremongering’ over comments they had apparently made that it would cost £32 for a family to use the NSC pool if the facility was to be hived off to a profit-seeking private company, without any government subsidy.
He pointed out there were several options on how these services could be privatised or corporatised and he suggested that ‘ministers should not start to wobble at this critical time’.
Replying to that point in Tynwald, Mr Cregeen said the £32 figure had been given to demonstrate the price that would have to be charged under the ‘user pays’ principle if all the overheads were covered by the entrance price and the private owner was able to make a profit.
Capital expenditure will have to be lower with less income
A lower level of capital spending will be unavoidable in the future given the drop in government’s overall income.
Minister Teare admitted that with the capital fund reduced to £1 million by 2015, there would be a need to replenish it in future.
For the past four years, government departments have only been repaying the capital on loans for capital schemes and not the interest.
But from 2015-16, departments will start paying interest again, initially at a rate of 1 per cent. This will add a further £10 million on top of the £30 million currently going into the pot, but that interest repayment will rise in phases to £30 million in subsequent years.
‘There is no avoiding the fact that we will have, for the foreseeable future, a lower level of capital expenditure than we have had historically, resulting from the drop in our overall income,’ Mr Teare told Tynwald.
He said government has committed £44 million to construction activity next year which will include work on improving Ballakermeen and Queen Elizabeth II high schools, an extension to the neo-natal unit at Noble’s Hospital, work on Mill Road Yard in Peel and the extensive local authority housing programme.
‘We have supported capital bids that reduce costs, grow income or provide economic activity. We can also ensure that we deliver a higher proportion of our capital spending, which helps both us and the construction industry,’ he said.
Mr Teare said the provision had also been made to transfer £35 million from the reserve fund, into the capital fund in order to repay the remaining additional Manx Electricity Authority borrowing from 2005. This is due for repayment or refinancing in July 2013.
He said there are various alternatives to a straight repayment from the capital fund and ‘we will consider all options including raising loans direct from the public if it is more cost effective than traditional routes, consistent with our overarching objective to minimise the ongoing cost of this borrowing to the authority.’
And Mr Teare added: ‘We will also reintroduce a higher annual transfer from revenue to capital as soon as we can afford to do so.’