Tony Holman: CCOs a Trojan horse for privatisation

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If the organisations are council-controlled, why does the city have no say over their operation.

Port profits would go into private hands and be lost to the city if CCOs were privatised. Photo / Brett Phibbs
Port profits would go into private hands and be lost to the city if CCOs were privatised. Photo / Brett Phibbs

Mai Chen's article last week about Auckland Council's "council controlled organisations" set out well the who and what of CCOs, examining some of their purposes, aims, questions and dilemmas.

But much of the analysis tended to be academic and theoretical, rather than analysing the politico-economic philosophy behind the CCO facade and the real aims of the governments that promote them, and of some businessmen appointed to CCO boards.

CCOs are a sort of Trojan horse, designed to infiltrate publicly owned assets under cover of the public's "owner", the council.

There are three major objectives behind the establishment of CCOs:

• To carry out the government's wish - to take over publicly held assets for eventual privatisation.

• To learn more about the strengths and weaknesses of each CCO's business.

• To take steps to prepare the CCO for privatisation.

The CCO device is a commercially-oriented two-step. The first step is to put various council functions at arm's length from elected members and council managers, that is, largely out of the council's control (despite the name).

The second step is to use the inside information gained by appointees to build a case for privatisation. Then will come the mantra that privately-owned businesses are always more efficient than publicly owned organisations.

So, councillors are swayed to accept the one-off gains from the sale of the assets, (which helps keep the rates down for the next election,) sell the public's assets and let them pay higher fees for those privatised services as well as facing rising rates. In this way, we allow the future to be robbed.

There are further reasons why the CCOs are a problem. How can something be "council-controlled" if the council is basically told to keep out. It must stay at arm's length which means it can influence only a very limited number of things because each CCO has its own unelected board of directors and management in charge of the day-to-day business and most of the policies.

Councils have a very limited say a few times during the year, mostly through an complicated annual rigmarole called a statement of intent, usually a fairly pallid document negotiated between the council and each CCO.

But the staff and board of each CCO hold all the detailed information and can call upon external consultants to bolster their arguments, while the officers and councillors of the "controlling" authority try to deal with the proposed "intent" within a tight timeframe and have insufficient information and resources to respond on an equal basis.

If people don't like CCO outcomes (such as prices, planning actions, or whatever), the dissatisfaction will be put at the door of the councillors, who are supposed to be in control. And they are the only ones the public can vote for or against.

The current set-up for our "Super" city resulted from Government legislation which required that all of the Auckland region's publicly owned assets be taken out of direct public control and had to be put into CCOs (the first part of the two-step). If National is re-elected this year, with an Act component, it is likely to require the Auckland Council to sell its billions of dollars of assets tied up in the CCOs to help fund the council's wildly ambitious schemes, particularly the subway project.

If legislation is passed to sell them, the consequences can be forecast.

Water would be sold to one of the international water conglomerates, resulting in much higher prices, lower efficiency and poor maintenance - as a study of the results of privatisation of water in UK, France, Canada and other countries soon reveals.

Privatisation of Ports of Auckland would put the considerable public profits into private hands, removing the millions of dollars now available for public investment in Auckland's transport system, leading to bigger loans and therefore higher rates.

The council's property CCO holds public land assets worth more than $900 million. Income from this portfolio and services it provides would also disappear.

I believe Aucklanders need to be rigorous in putting it strongly to all parties in this year's election, that the CCOs and the assets they hold must not be privatised and that these assets should be put back under the council's direct, democratic control.

Tony Holman is an Aucklander with more than 20 years' experience in local government.

- NZ Herald

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