The failure of service privatisation

The Australian Council of Social Service and Choice magazine recently commissioned a study into the effects of privatisation on “human services”. They found that, far from achieving efficiency, opening social services to the market has been disastrous.

Surveying vocational education and training (VET) and employment services, the study reported that profit comes at the expense of service quality and accessibility. And predatory practices are widespread.

Since the mid-2000s, TAFE institutions have had to compete with private education providers for government funding, which has been allocated based on student numbers. This has led to institutions focusing primarily on attracting the largest possible number of students, rather than providing a decent education.

Private institutions have lied to students, promising free laptops and other perks, and have encouraged them to take out exorbitant loans they cannot repay. Students were advised to enrol in – and pay for – programs they could not complete – including online courses for people without access to computers.

VET institutions are supposed give students industry-specific training and qualifications. But because private providers can accredit students however they please, the standards are shonky. A quality audit found aged care qualifications were offered in less than 15 weeks; the industry standard is 52 weeks.

The result is that students receive a worse quality education at a higher cost. Student debt has ballooned over the last decade. Average annual fees rose from $4,000 in 2009 to more than $14,000 in 2015. Meanwhile, the completion rate has plummeted, particularly for disadvantaged students; only 13 percent of Indigenous students and 20 percent of students with a disability complete their course.

In employment services, the report found that privatisation failed those most in need. Recruitment services were effective in filling only specific shortages, such as senior management. People facing the greatest barriers to employment were least well served, centres in regional areas were being shut, and the provision of translators and extra resources to assist people with disabilities was routinely cut.

The vast majority were not helped to find work: three-quarters of job seekers in one group surveyed were still unemployed three months later.

“Consumer choice”, the supposed great freedom the market provides, has failed in both areas. The existence of multiple institutions with similar purposes means that those in need are often unsure of where to go.

And it has led to a new industry of agents who act as brokers connecting people with service providers, which often involves conflicts of interest or presents yet another impediment to people getting the help they need.

Without challenging the holy grail of privatisation, the quality of services cannot be improved. As the report notes, these “unintended or perverse outcomes” were “completely in accordance with the basic tenets of competition theory: for-profit firms are expected to maximise profits”.