Wednesday 26 October 2016

Best is needed from private and public sectors

Anti-private sector rhetoric is on the rise, while unthinking and simplistic statism increasingly dominates debate

Published 15/05/2016 | 02:30

There is universal agreement, to say the very least, that the health system could be more effective in treating the people it exists to serve. (Stock picture: PA)
There is universal agreement, to say the very least, that the health system could be more effective in treating the people it exists to serve. (Stock picture: PA)

If a foreigner with no knowledge of this country had spent last week here attempting to understand our general political orientation, they might well have concluded that we are a nation of leftists and reflexive statists. On some of the most discussed issues of the week - housing, health and welfare - far more voices were heard in the broadcast media calling for the government to address all of our ills. Many of these voices held private enterprise in suspicion, if not contempt.

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A prime example of this was Thursday's Sean O'Rourke show on RTE radio, which dealt with the linking of child benefit payments to school attendance. Three guests appeared on the show to discuss the proposal, which was contained in the newly printed Programme for Government. All three opposed the move.

In fairness, the show had asked for somebody from the government to make the case for the proposal, but, indicative of the shambles on the government side on the issue, nobody could be found to speak for the measure.

In Irish public discourse, it passes as valid comment to say that striving to get a better balance in relation to the rights and responsibilities of citizens is "Thatcherite" and "right-wing". That is nonsense. Trying to get such a balance right is much more how the Nordic countries are today, than how Britain was three decades ago.

In northern Europe, they take responsibilities and rights very seriously. If a young person refuses training or a jobless person refuses a job, benefits are curtailed. They don't pussyfoot about, and nobody views this as callous or uncaring.

The open-ended access to many benefits, and the comparatively limited (and recent) conditionality in Ireland, has been a source of bafflement to outsiders - the OECD has, for instance, urged until its face has turned blue that Ireland adopts the sort of conditions that exist in northern Europe.

Earlier in the week, another proposal in the Programme for Government came under fire. This time, an anti-private-sector bias was in evidence from, of all parties, Fianna Fail.

There is universal agreement, to say the very least, that the health system could be more effective in treating the people it exists to serve. That vested interests and the usual ideological suspects reject suggestions of private involvement is not surprising, but Fianna Fail's hostility sounded as if it was unthinkingly jumping on what it perceives to be a popular bandwagon.

TD Thomas Byrne on Friday told Newstalk Breakfast that he was against private sector involvement in areas now in the remit of the public sector. Billy Kelleher, the party's health spokesman, said on the same station's Lunchtime with Jonathan Healy show on Monday that he was against the idea of competition in the health system. Although he made many sensible points, his claim that having hospital trusts bidding against each other is unwise because the country's population is too small, was bizarre.

In my view, the State should play the central role in healthcare. The evidence from the developed world, though vast and not always easy to interpret, generally points to better outcomes where that is the case.

But there are no hard and fast rules on how best to involve both sectors. Again, looking north is instructive. Over the past 20 years, Sweden has been innovative in designing mechanisms to involve the private sector in its once state-dominated system in order to generate efficiency-enhancing competition.

The public sector has strengths and weaknesses. The private sector has too, but usually different ones. The challenge is to design systems that get the best of both and eliminate the weaknesses of each.

Ideologues never see it that way. The rigid Left seeks to expand the role of the State in every direction and curtail private endeavour, via increased taxation and more regulation. Its counterpart at the other end of the ideological spectrum believes in shrinking public provision and cutting taxes at every opportunity.

In Ireland, the latter position is infrequently heard, while there is an almost reflexive response that spending more taxpayers' money is the answer to every problem. That is the response, even if spending that money is ineffective, as if doing so anyway is a way to prove a willingness to act and a way to show that you really care.

One reason for the prevalence of the latter point is how infrequently it is challenged from those who usually know most about such matters - the scholarly community. Indeed, much of what comes from academia here lends support to the view that allocating more money and resources is the solution to society's ills.

Here is a good example. Dr Mary Murphy, a very knowledgeable academic sociologist and someone for whom I have great respect, wrote the following on how the State helps the jobless get into work: "Ireland has a relatively good record. Ireland spent 0.49pc of GDP on active labour-market programmes in 2006. This is significantly more than the 0.15pc of GDP spent by Australia, New Zealand and the United Kingdom, and is close to Nordic-level investment of 0.64pc of GDP. However, the efficiency and effectiveness of this expenditure needs significant enhancement."

Note that a "good record" is about how much is spent. In this analysis, effectiveness is secondary, if not an afterthought.

In fact, Ireland's record in getting people into work via FAS training schemes and other mechanisms was appalling - the system was designed, but failed, to help the taxpayers who paid for it. Huge sums of money went on utterly ineffective training programmes during the boom, while at the same time, Ireland had the highest rate of jobless households in Europe. This was despite the fact that the economy enjoyed the strong rate of job creation in Europe for years up to the crash.

Last week, droves of opposition politicians and interest-group voices advocated State over private solutions - and a holder of legal office joined in too.

Edmund Honohan, master of the High Court, said that, in his learned opinion, it would be perfectly legal to start a large expropriation programme and to pay those whose property was purchased compulsorily by the State, the same price they had paid for it. Vulture funds - everyone's betes noire of late - would be deprived of the profits they made on the (considerable) risks they had taken.

While Honohon undoubtedly knows infinitely more about the law than I do, I simply cannot see how this does not amount to an arbitrary and unconstitutional infringement of the right to private property.

That is not to say that compulsory purchases should not happen, or that they may be a proportionate response to the crisis. But they would require - for legal and equity reasons - that the current market value of properties be paid to the owners.

That would also be required, lest it resulted in a consequence Honohon surely does not intend.

If properties are taken over by the State at the original purchase price, many of those who bought at the height of the boom and who are now in negative equity, would be presented with a golden opportunity.

They would have every incentive to board up their properties quickly (worsening the housing crisis) and seek to direct bureaucrats towards them so that they could be compulsorily purchased. If officials deemed the property was empty and slapped a compulsory purchase order on it, the owner's negative equity would be covered by taxpayers.

All the major difficulties faced in housing, health and other areas are complicated.

Solutions will inevitably involve the State and the private sector. Both have something to bring to the table.

Sunday Independent

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