Privatization will cost more

| 03/10/2014

(CNS): The independent member for North Side has said that the privatization of the public sector will cost users of government services more and that he was disappointed that the Ernst and Young report hasn’t spelt that out to the public. Ezzard Miller pointed out that the delivery of former government services once taken over by the private sector will be driven by profit and there will be no opportunity for subsidy from government and consumers will feel the pinch. He said unless the services to be privatize are losing as much as 35% through waste or inefficiency then no matter how competent the private sector entity to generate a profit services will have to go up.

“Efficiency and effectiveness cannot compensate for profit,” said Miller.

He pointed out that efforts to privatize garbage collection by the government in the 1990s would have seen a massive increase to the consumer even with the cheapest bid with a jump from $25 fees to almost $600.

The independent member warned that both government and the consumer are likely to find that the promised savings will be nowhere to be found. He said by selling its assets or more profitable entities government will be left with nothing to subsidize the services that it must supply and those that are rejected by the market place because they are unprofitable.  Miller warned that the recommended government fire sale may lead to increased taxes to help a leaner government pay for the services it must still supply as it will no longer have its more profitable revenue streams.

The outspoken independent member who is the first politicians willing to comment on the record to CNS about the report, also warned that given the scale of the recommended sell off and the pressure to move ahead with rationalization, government is not in the best position to sell its assets. Under the circumstances he said the value of any government entity on the auction block “will be artificially reduced.”

However, Miller’s major concern about the report, which he said was difficult for the man in the street to digest because of the format and presentation was that government had given the auditors the wrong remit.

He said that a large part of the report is likely to be irrelevant as he said government is not willing to implement much of it. Cabinet should have made policy decisions about what it was willing to divest first, Miller pointed out, and then asked EY to analyze how much the entities would be worth and the best way to go about selling, divesting or bringing in a partner.
Miller said privatization is not the only answer to cutting government costs and improving its own management and efficiency was a more realistic alternative. He said government is obligated to provide certain services and not everything needs to be about profit there are some things, he said, that must be subsidized.

The independent member said if government goes down the privatization road the danger will be that the private sector creams off the services that have the potential to generate a profit from the consumer. Government will be left with a catalogue of services that must still be provided that are costly to deliver and at the same time will be managing on lower revenue streams.

The independent member urged government to think about a different approach and to at its assets and personnel. He called for better succession planning to encourage keep the best staff. The member also pointed to government policy on spending as a significant area for improvement.

He said that government policy still drives a considerable amount of waste as he pointed to massive investments and injections of cash into unnecessary projects such as the hundreds of thousands of dollars spent on world class sports facilities on Cayman Brac.
 

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Category: Politics

Comments (41)

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  1. Anonyanmous says:

    Cayman can learn more about taking care of Cayman from this, than they can from the E&Y report.

    https://www.youtube.com/watch?v=aXQxTv3nB14

    Facts or fiction?

  2. Slowpoke says:

    I have worked for cosultant firms as well as an independent consultant, here and abroad.  Everybody knows that the trick is to offer a cheap initial report, but leave vague recommendations and lack of details, so they have to hire you again.  That is where the real $$$$'s are

  3. Anonymous says:

    Mr miller is interested in votes, not cutting budgets. If that means everyone has to pay more to buy his votes via CS, then that’s what he’s going to do and promote.

    I’ve listen to him long enough on his personal popularity show on Rooster show to know a self-important sanctimonious opportunist when I hear it.

    • Anonymous says:

      Regardless of what you think of Ezzard is besides the point.

      The fact is, he is right about this. Which ever services is turned over to the private sector will end up costing more. After all, a business is in business to turn a profit.

      So all of those who want to see this come to past, do not complain when the costs go through the roof.

    • Anonymous says:

      You are misinformed. Ezzard is not worried about votes darlin', after all he has no competition in his district. It's the same in Eastend. So, Ezzard not saying this for any votes, he knows he'll be back again next time with the same BS card dealt to him, where nothing gets done for Northside or Eastened for that matter. Check it out.

  4. Anonymous says:

    I believe that Ezzard knows that many civil servants will not be employed through the private as they do not have the drive required to compete in the private sector and also it is a good stand to take with civil servant voters. a WIN – WIN if you will All that must be ignored are the reality based comments found on this site.

  5. Anonymous says:

    Folks, you need to be as thick as two short planks sawn in two and nailed together (or rich) to swallow the lie that privatisation of most of our public services will automatically result in lower costs to the public. It's a load of rubbish. Mr.Miller is correct. Tell us what savings the public can expect to see following privatisation. Cut the BS. What reductiuons can be guaranteed? Give us a list with some numbers we can include in our household budgets. If you can't, please shut up!

    • Anonymous says:

      The numbers are out there for all to see.  The intelligence needed to understand them?  Not so much. Your comments are a perfect example.

  6. Anonymous7 says:

    Rationalising can work. The problem Ezzard has is that the Civil Service is effectively a Welfare Scheme in disguise, and with the efficiencies and profit that come with private sector, this Welfare programme will no longer exist. With that being said, however, you can't just rationalise parts of government and then allow them to be a monopoly. Consumers will suffer with price hikes of course. Monopolies cut supply and raise profits (Marginal Price equals Marginal Revenue). Hopefully, with competition and proper competition regulation, prices will be reasonable and therefore this can and will work.

  7. Anonymous says:

    Privatization will always fail if the contractors simply get into a 'change the name, do the same' deal where they have to retain all the old public sector managers and staff.

    The way to make it succeed is to force all the existing staff to compete for jobs with the new employer on merit but that in itself poses financial penalties because unless they are on contracts you could have to lay them off and pay severance.

    The bottom line here is that the civil service (and that's often a contradiction in terms) have the deck stacked firmly in their favour and you aren't going to derail their little gravy train easily.       

     

     
  8. Anonymous says:

    So right now it cost $50 million to get almost nothing done but feeding the worthless.  Your saying that it will cost more if we stop paying them? Please explain and use facts that can be checked out by a real person.

  9. Sick of Greedy Pigs!! says:

    Government should revist all those RICH Pensioners who are getting all medical for free regardless of the cost, in addition to a pension that is ridiculous, but they are lavishing away with their own personal riches in land etc.  I could name them off right here, but I know you all know who they are, they are the ones draining the system.  Why can't govt. make them pay a portion towards their medical insurance coverage each month?  They are wealthy for peats sake!!!  If Social Services can acquire your assets when you are old to look after you, then the same should apply to these rich and ridiculously greedy pensioners!! Enough is enough!

  10. SM says:

    Public sector companies need to do a better job at recruiting top level managers who can innovate existing business models. The problem is the existing 'if it's not broken don't fix it' attitude which has led to keeping business practices that we're applicable 20 years ago but are now counter productive. Cost cutting strategies represent only 1 of the tools that need to be used in order to make meaningful, sustainable change that results in companies at least breaking even  (which should be the goal of all public sector companies).

    Privatization is a joke. Go ahead, sell it, and watch how fast competent managers turn those same 'headache inducing businesses' into money making machines.

    The problem is never the nature of the industry, or the product/service. It always comes back to management and their ability to innovate and adapt the business to the ever changing environment. 

     

    Just my 0.02 cents 

    • Anonymous says:

      Another problem is vested socio-poilitical interest in certain inneffecient systems. The 'good management' has to start from the very, very top.

  11. Anonymous says:

    mr. miller you need to go back to school….at least take an economics course before you start spewing complete and total utter nonsense who advised you on this?….the civil service?

    • anonymous says:

      Ezra's is right.  The costs will go up.  And services will be cut.  The private sector is about making profits.  Why else would they be salivating at the prospect of laying their hands on aiece of the business.  To make money, stupid.  They do not have the well being of the cup try at heart.

    • Anonymous says:

      Sportsfan , as you failed to check your punctuation (absence of three capitals and one full stop) your comment might well be viewed as somewhat sloppy several regards. Perhaps it is you rather than mr. miller (sic) in dire need of being sent back to school?

  12. Two Words says:

    Dr. Horter.

  13. Anonymous says:

    How can you say privatisation will cost us more? Let's use the waste disposal, no one use to pay their annual fees therefore of course this dept was loosing money's. I know at least 50 people that never paid for their homes and 5 apt complexes to date have not paid a dollar for the last 5 or more years. If the accounts dept would do theirs jobs outstanding bills would be paid.. I am probably one of the only idiots on the island that paid my garbage fees and still to date pay my boat license fees annually. Oh forgot I pay my vhf radio fee too. Everyone I know with a boat have never paid… This is the problem government can even run their own businesses. In privatisation the owner of these companies will make sure all bills are paid and cut costs to make their business more successful increasing profits. In other words they will get rid of all the dead staff.. 

    • Anonymous says:

      So, you privatise those services – lets stick with garbage collection – and still 'no one' pays their garbage fee. What happens? They dump it up in Barkers. Yeah, the private companies made some money, now someone call DEH to go pick up the garbage in Barkers.

    • Anonymous says:

      Good, sir. Please read over (very carefully) your post, starting with the second sentence. Everything you said has no bearing whatsoever on the reality that privatisation will drive costs for the consumer upwards. If you doubt this, just wait!

    • Anonymous says:

      Man, you're lacking some serious grey matter.

  14. Anonymous says:

    I think Mr Miller has answered his own question, I would assume that some services offered by Government are losing more than 35% through waste and inefficiency which would leave ample profit for an enterprising private sector.  However, if all that happens is it's privatised and the waste and inefficiency remains, then he is corrct, it will cost us all more.  The only benefactors will be the cronies chosen to run the service.

    I would have thought that you could establish the cost of the service, add in a 'no more than inflation' clause to the contract for any increases and see if it flies.  If no-one bids on the contract then Mr Miller will have his answer, no profit to be made, if you get bids you can assume there's money to be made. 

    • Anonymous says:

      Right. But EY didn't make that recomendation. They said 'sell' without qualifying it. Tehy didn't even qualify that wasteage was occuring, to address your assumption. So if you follow their recomendation you sell and then discover that the cost of living goes up. Oh well, at least you lined C$C's pocket. That's my assumption.

      • Anonymous says:

        My assumption is that in any business there is wasteage, either E&Y didn't need to quantify it because it was too obvious, or they've made a suggestion that needs further qualification. I take your point that they said sell and haven't said how much they will save, but then I guess they will be back if they decide to go ahead with it.

        At the moment the report is probably peppered with a lot of 'mights' and 'maybes', once someone makes a choice to look at this a bit closer I would assume you will get a 'go', 'no go' report based on whatever the outcome is desired. Reduced head count, easy answer, sell, reduced cost for all and better service, not so easy.

        • Anonymous says:

          So in other words you haven't even read the report. This is the problem. You assumed wrong. EY gave a 'go report', to use your terminology, but without the justifications you assumed they would have needed to make those assertions.  

  15. Anonymous says:

    Yeah Yeah…..Caymanians look another country—-Grand Cayman is no longer GRAND!!!.

     

    We can't survive here with a full time job much less a measly pension – That is; if we get it?

     

    But the politicians have theirs secured! Even double

  16. Anonymous says:

    well, its' really a no brainer.

     

    You have a government entity that is losing money. It employs many caymanians. If the government is willing to accept that loss, but employ caymanians at the same time. It makes sense.

    But all monies are going into government coffers.

     

    Privatize it. And yes, that entity will be making money. A profit. But not for the government. Not a dime going into government coffers. And now government has to pay welfare for those government employees (remember 70% of government employee's are unemployable in the private sector, due to inadequate skillsets).

     

    So not only does the government lose any revenue generated by said privitized company. But welfare costs add to that burden.

     

     

    • Diogenes says:

      The point is that its costing the government more to fund the loses than it is to pay the welfare costs, which in any event will only arise if the employees are not necessary or inefficient.  The money that goes into government coffers is exceeded by the money going out – that is what a loss means.  That cost is shared between every taxpayer on his island.  The suggestion is that, if privatised, the services will be provided at a lesser cost – whether you pay the agency directly or pay higher taxes – than the current situation.  Whats your argument – that we should pay people from the tax payers pocket for service that is sub standard simply so that those who are not necessary or not working hard do not need to go on welfare, even if that would be cheaper, or do not have to work under the tougher regime in the private sector? 

      • Anonymous says:

        Actually if you read the EY report (even just the first few pages) you will see that Government is not operating at a loss.

  17. Anonymous says:

    Why is it that people running an institution can be efficient, pay attention to and manage cost, to ensure that their operated establishments run smoothly and are profitable, but, people running a country cannot do the same!?? For heaven sakes government/so called leaders pull your socks up, get your act together and revise your practices to ensure the above!

    Dont you feel embarrassed as leaders having to get report after report about your incompetence? This debackle has gone on far too long and has embarrassed me as a Caymanian with intellect and a significant intelligence bracket! Now you are taking about basically puting the government up for sale, absolutely ridiculous, its really a simple fix, either you just dont care, or you are all educated idiots, please advise!

    • Anonymous says:

      Actually, if you read the report you would have  noticed that it said the Cayman Government is doing well. But they recomend pirvatization so that (a) private companies can get in on the act and (b) Government can get quick cash to pay down debts to let them borrow more to engage in a new round of building, etc. Because work has slowed down for the consultants and contractors.

    • The Parliamentarian says:

       Anonymous 09:24,

      Well, some are indeed educated idiots, but some are just ordinary idiots, and others are pretty darn hard to classify.  Perhaps they are all idiots, as this governmental mess has been going on for too many years.  Will this group of leaders straighten things out and make it better for everyone?   No, because things are no different now than they have been.  Too much greed, theft, graft, payola, nepotism, etc……. just too much going on that is never disclosed.  You have to remember that the politicians are just Caymanians that were chosen to run the show.  What do you expect?  A democracy just doesn't work very well with human beings.

  18. Anonymous says:

    Iwould say 35% is low. I would think 3500% is more likely.

  19. Anonymous says:

    Ezzard's views are obviously more important than the mountain of economic data that points the other way.

    • Anonymous says:

      What econoic data? You mean the opening part of the EY Report where they say Government is doing wel economically? Or did you not read that page?

  20. Anonymous says:

    How can anyone pay attention to a man that helped destroy the economy of cayman.

  21. Anonymous says:

    Ok, I am really worried now. This is the second day running I have agreed with a comment by Ezzard Miller.

    • Anonymous says:

      08:47, congratulations, for the second day in a row you have admitted to being an absolute donkey.

      For the last 30 years our Government has been advised in report after report on what ythey need to do, and each and every time, they have ignored the recommendations.

      Now we acually have people with balls in Government, who are going to implement the changes so desperately needed and eveyone is crying foul including Miller who is an absolute numpty. 

      No one is to blame apart from those tasked with runnig our country into the ground, those very same people who have been voted in every 4yrs, and those who put them there.

      And those who will be cut from the CS need look no futher than themsevles and their job performance, they were extremely lucky to have had it for so long, becasue in the real world they will soon find out how an employee should conduct themelves at work.

      The bubble has been swelling for 30yrs and now its going to pop.

       

      • Anonymous says:

        And what should we expect is the price to pay by those top level decision makers with golden parachute pensions and benifits? They (those same decision makers created this mess). Are they to continue to be unaccountable? while continuing to collect huge pensions and benefits, while so many suffer?

        That is what is so unfair, immoral, corrupt about all that is going on here….and elsewhere. And is the fuel for much of the unrest accross the globe today!

    • Anonymous says:

      Ezzard talks so much he bound to say something even remotely sensible from time to time.