John Roughan: When the private barrow helps fill the public trough

The trouble with the Starship is that it sits on a fault-line, the same fault that runs under the railways, the national airline, the electricity market, entrepreneurial public schools and many other subjects that erupt with regularity these days.

There is a line of political weakness at the moment where those great tectonic plates, the public and private sectors, meet and overlap.

At the boundary, where there are industries still struggling to adjust to market forces or still trying to resist commercial encroachment, the conflicting pressures of private enterprise and public finance graunch and groan and throw up apparently insoluble issues.

Most hospitals and schools still sit on the social sector but opportunities such as export education and the Starship enterprise (thank you, Kim Hill) are forever coming through.

Likewise, newly privatised or corporatised public services such as rail and electricity are supposed to be in the market sector but political sensitivities still cushion them from commercial failure.

Small shareholders have been buying Tranz Rail in expectation of a Government bailout. Big electricity users, who insure against other business risks, fail to hedge themselves against dry-year prices because they believe they can get the Government to step in.

Most of the eruptions would die down if the Government was simply to remain unrattled and show the industries where they stand.

On electricity, it should let unhedged companies pay the price once or twice. They'd soon learn. On rail it should declare it has no preference for a particular transport mode and certainly no intention to go back into the rail business.

To the Starship it should say, "Buy what you like with the funds you can raise but you will have to raise the running costs, too".

Instead, the Government convenes a committee to discuss supposed market failure in "infrastructure" investment and each time tension erupts at one of the pressure points there is general consternation and a great deal of confusion about which side represents the public interest and which is pushing a private barrow.

By a margin of a zillion to one, letters to the Herald this week sided with the Starship Children's Hospital against the decision of the Auckland District Health Board to destroy the brand.

Just about everyone decided the doctors and sponsors of the Starship were upholding the public interest and the board, or its chairman Wayne Brown, was hell-bent on some perverse personal quest. Well, I beg to differ.

One way or another we are all in business. Whether we are bankers or actors, altruists or paediatricians, we are all looking for the personal rewards of making a social contribution. There is nothing wrong with that so long as there are checks on greed.

In the private sector the rewards are checked by competition, accountability to sharemarkets and, most of all, by the limits of what customers are prepared to pay for what we do.

In the public service there is no less competition for a share of the limited revenue that a democratic government dares to raise by taxation.

Private enterprise comes in different forms. There is the honest kind that declares a profit (or loss) from trying to sell something directly to paying customers. And there is dishonest or, to be charitable, hidden private enterprise.

Hidden private enterprise often declares itself "not for profit", which usually means the surplus it generates, from sales or donations, is distributed internally rather than to shareholders and the state in taxation.

People can find high incomes and highly satisfying conditions of work within so-called not-for-profit organisations. They do not always realise that they are the ones profiting instead of the providers of capital, which in their case are often donors and taxpayers.

The Starship is a phenomenal commercial success - so far as it wants to be. The hospital-cum-theme park was built in defiance of state priorities, which sought to fit a new Auckland children's hospital into a range of upgraded child services.

Successive governments refused to build the paediatric palace that child health specialists desired but with independent fund-raising the enthusiasts eventually got their prize.

When the striking building was completed and branded the Starship, it quickly gained irresistible appeal to sponsors, celebrities, event organisers, paediatricians and perhaps even the children who had to go there.

There would be nothing wrong with that if the paediatricians decided to go all the way, cut their umbilical chord to the board and set themselves up as a truly private enterprise.

Like any other private hospital they would then have to bid for publicly funded work and they would have to ensure that any capital equipment they bought did not add unnecessarily to their costs.

But the paediatricians probably know they are better off in their half-way house, using the Starship appeals to buy what they want, knowing the public purse will have to carry the ongoing costs.

The Starship Foundation says everything it buys from fund-raising is in line with the District Health Board's priorities, but would an organisation in that position use independent income for items the board would buy for it anyway? Particularly when it pitches its appeals on supposed deficiencies in its state allocation.

If the Starship wants public finance it should be a department of Mr Brown's bailiwick. If it wants to live on its fund-raising brand he should invite it to go the whole hog. Straddling the fault line like this can only cause continual tension for them and dubious expense for the rest of us.