State-owned company to be set up for North East Link tolls

The Victoria government has announced that it is setting up a State-owned company to collect tolls for the North East Link.

Hopefully this will be a positive move and another step away from the excesses of the privatisation of the 1990s.

The 90s saw both state and federal governments privatise a lot of their assets, enticed by an easy way to pay down debt, pay for shiny election promises or a seemingly easier way to pay for infrastructure. Yet in many cases this privatisation resulted in private companies operating in either a total or geographical monopoly, giving them a guaranteed income stream without having to compete in a competitive marketplace.

Competitive marketplaces between private companies do work and very often result in the "efficiencies of the market" so often pointed to by their proponents. However they require a balance between companies wanting to make as much profit as possible and consumers having a realistic choice between buying their products, buying their competitors' products or neither.

Fixed infrastructure such as toll roads are unlikely to result in such a competitive marketplace as to some degree people will be forced to use them based on where they live, creating a captive market. As a result, in a lot of circumstances these companies have little incentive to improve service or streamline prices.

According to its proponents, privatisation would reducing prices and improving service by companies increasing efficiencies. In practice, privatisation has often resulted in increased prices - as the company needs to make a profit - and either similar, marginally better or sometimes worse service - as there is no impact to reducing service to a captive market. Any efficiencies found by the company become profit rather than benefitting customers.

And increased prices for services that people have no choice but use everyday increases the cost of living.

This is not to say that State-owned companies or agencies will always be efficient or well run. Indeed poorly run agencies gave fuel to the push to privative them in some cases. However the proponents of privatisation insist that private companies will always be a better alternative, something that the experience of the last 30 years seems to refute.

It seems that we are slowly moving towards a better balance between public and private enterprises and an acknowledgment that privatising public monopolies into private monopolies don't achieve benefits for the community at large.

In this at least, the State government looks like it is starting to agree, highlighting in their press release that "toll revenue will pay for long-term maintenance including ensuring the safety and upkeep of the tunnels, road surface and roadside areas". Left unsaid is that a private company would take a lot of the toll revenue as profit.

It is a little surprising though as the otherwise impressive Andrew's government has been quite in thrall to private developers, up to the point where they increased and extended tolls on CityLink as part of a deal with developers to build the West Gate Tunnel even though this was unlikely to be the most cost effective way for road users to pay for the road.

Hopefully this Australian-first will be successful and lead to existing and new toll roads managed in the same way in the future.