Electricity Privatisation and the NSW ALP:
An Insider’s View

Paul Pearce

This is an edited version of a talk given by Paul Pearce, ALP State Member for Coogee to the Sydney Branch of the Australian Society for the Study of Labour History, 29 July 2008

To consider where we are at today, a little history is needed. As Hummer readers will recall, Bob Carr’s NSW Labor government some 10 years ago sought to privatise all aspects of the electricity in NSW – generation, poles and wires, and retail.

This was resisted by the NSW union movement and rejected by ALP State Conference. Premier Carr and the Treasurer Michael Egan accepted the decision of the party and went on to campaign against the Liberals on this very issue at the 1999 state election.

The Liberals in fact offered a huge electoral bribe for the public support of electricity privatisation ($1000 per household) yet were roundly rejected in the election. Labor swept to victory in a landslide result. Arising from the conference decision, a 12-point assessment criteria was put into the party platform to assess any future privatisation proposals.

Fast forward to 2007. Labor had recently won its fourth election on the trot, and new Premier Morris Iemma announced in parliament that there was to be review of electricity in NSW to address future needs for additional generation capacity and how that was to be funded. In his statement he specifically ruled out privatisation of the poles/wires/distribution and, significantly, generation. He was however silent on retail.

To backtrack a little, it should be recalled how retail came to be in government ownership. The retailers had their origins in the old county councils and were governed by boards elected from an electoral college of local councillors (or Aldermen as they were then called) in a specified area. Reforms resulted in them becoming state instrumentalities with appointed boards of directors within a corporate structure. This was common in the late 1980s and 1990s and essentially prepared many state utilities and the like for privatisation. It changed the essential nature of the relationship between government and the public sector utilities.

In 2007 Professor Tony Owen was appointed to chair the review. It was known that he favoured a privatisation model, but many of us believed that the constraints imposed by the Premier’s initial statement would prevent this type of recommendation. The terms of reference for the inquiry had four points. Points one, two and three were fairly uncontroversial. However, point four contained the political time bomb: ‘Determine the conditions needed to ensure investment in any emerging generation, consistent with maintaining the state’s AAA credit rating’.

It was generally viewed that this term of reference was inserted at the behest of the Treasurer, Michael Costa, and was clearly an invitation to pursue a privatisation agenda. The report came down shortly after the 2007 federal election and immediately caused a blow up within the party and the union movement.

Several attempts were made to resolve the differences with a number of models being proposed by various persons, members and unions. Every attempt failed in no small part due to the intransigence of the Treasurer who seemed to have been given carte blanche by the Premier. Support for the report and the recommendations contained therein was purportedly obtained from the NSW Labor parliamentary caucus at a special caucus meeting in December.

Let’s put that meeting in context. Parliament had risen the previous week. Many members had returned to their electorates, some had already left for annual leave with their families. A special caucus was called over the weekend. The caucus notice went out on Friday evening. It arrived in my office after 5.00pm. To suggest that this was a legitimate caucus meeting is stretching credulity. Some members, including myself, proposed that the recommendations should be tested against the 12 points in accordance with the platform. A motion to this effect was defeated.

Yet, by early in the New Year, a committee was formed. However, whereas the party platform clearly anticipates that such a committee should be a party committee, we were presented with a committee comprised of various people outside of the party and some who were constrained to comment only on limited aspects of the proposals (such as environmental and social impacts) rather than the proposal as a whole.

The parliamentary party representatives were both known to support the proposal. In other words there was a contrived majority to give the result that the Government wanted. The report of the committee came down as everyone expected. And the response was exactly as you would expect. The respect for its finding was zero. Over February 2008, the calls for a special conference of the party became louder. The administrative committee resolved to call a conference at the earliest available date in May.

The result of that conference is well known. By a vote of 7 to 1 the party, its branch members, affiliated unions, left and right factions, all roundly rejected the proposal by the government. The performance of the Treasurer was memorable for all the wrong reasons. The Premier, wisely, chose not to speak in the debate. Instead he held a press conference, indicating his intention to proceed in spite of the conference decision.

Without breaching caucus confidentiality, you can imagine that the caucus was rent with division. The end game is now history. A significant minority of members, from both the right and the left, indicated that they were not prepared to support legislation that was in clear breach of the party platform. This attitude only hardened with the conference decision. The fleeting possibility that the government might pass its legislation with the support of the Opposition came to nought. As a result Iemma was forced from the leadership and Michael Costa from the Treasury, replaced by Nathan Rees and Eric Roozendaal.

So what can be drawn from this matter as regards the historical relationship between the party and the ALP in government? There is, as with all labour and social democratic parties, a tension between the party membership and the parliamentary representatives. The generally accepted position is that the parliamentary party can chose if and when to implement party policy, but it is bound to not move contrary to the party platform. The Hawke federal Labor government of the 1980s respected this expectation, by at least seeking and obtaining changes to the party platform through the National Conference. It also backed off confronting the party outrage on the proposal to allow the United States to test MX missiles off Tasmania.

Conflicts between the party in government and the party organisationally have historically led to electoral defeat and, in a couple of instances, the party tearing itself apart. Two examples of the latter was the 1916/17 split over conscription, and the 1955 Queensland split (notionally) on holiday pay entitlements. In both instances the party lost government, with Labor ‘rats’ siding with the Tories.

No split has resulted today, yet NSW Laborites do not want to see a repeat performance over this issue. Equally, the party platform as determined by the party mechanism cannot be ignored in the fashion proposed by the government and treated with contempt, as exemplified by the Treasurer.

On the broader question of what this dispute says about the way the party operates, a number of observations can be made. Firstly, there is an obvious rupture in the dominant Right faction between most of the trade union Right and the parliamentary Right. It also shows that the ‘New’ Right or ‘Terrigals’ have little sense of the ALP’s historical background and, frankly, seem to see the rank-and-file role only in terms of fund raising and handing out voting cards come election day.

Many of the leading lights in this sub-faction came through Young Labor in the late 1980s and showed their colours early by effectively destroying the internal democracy and dynamic of that organ of the party. They have an essentially elitist political philosophy, and see the ALP as a vehicle for their own advancement. What passes for intellectual analysis is limited to market fundamentalist Chicago School of Economics. Whilst the right and left of the party have fought on a range of issues, there was, in general, a basic Laborist ideology. I’m not too sure that some of our current caucus members would know a Labor ideal if they fell over it.

Whilst Labor has clearly moved away from being a purely working class-based party, we still have obligations to the many thousands of workers who support us at elections. Had the government prevailed on this issue, the relationship of the parliamentary party and the organisational wing, as well as our trade union comrades, would have inevitably changed, and, I believe, for the worse.