News
BackDuring recent years, the European Commission has time and again demonstrated what it thinks of the provision of public services such as public transport, water supply and wastewater disposal and other communal services; the answer is - not a great deal. If European Parliament and Council are reluctant to accept a legislative proposal of the Commission, it does not regard this as a problem: as soon as the opportunity arises, the Commission just puts its liberalisation proposals forward again.
In 2003 already, the European Commission attended to the so-called services of general interest. These are services, which are provided by society itself, i.e. by the public sector. They include for example healthcare, educational or social services. Sectors, which could also be profitably provided on the market; at least this is the opinion of many business representatives.
The Commission was only too pleased to take these wishes on board and invented the so-called “services of general economic interest” as a next step. A definition, which reveals the true opinion of the Commission: it is obviously not concerned with the best possible provision of these public services, but with the economic interest of some companies in these services. In any case, these services are problematic for the Commission, as they concern services, which, in its opinion, could be provided equally well by private companies, i.e. they would be best put out to tender and no longer be provided by the public sector. What the Commission deliberately overlooks, however, is the fact that the primary aim of a private company is to generate a profit; providing the services is thereby only a means to an end. And - in simplified terms - how do I generate a good profit when providing a service? By saving labour costs, by scaling down working conditions and by keeping the quality of the service at such a (low) level, which is just about accepted by the customer. A profit can also be secured by making the service more expensive. In general, however, liberalisations and privatisations of services are not concerned with promoting competition. Normally, the market is divided among a few multinationals in form of an oligopoly, as demonstrated by the liberalisation in the energy sector, in respect of telecommunication or of postal services.
In accordance with its philosophy, the Commission has recently published several legislative proposals, which shall accelerate the submission of the public good through the market:
Tendering communal services
The Council and the European Parliament have just reached agreement on the so-called Service Concessions Directive. This does not concern anything else but the tendering of communal services such as water supply and wastewater disposal, refuse collection, health services and similar public services. The proposal stirred up excitement in particular in Germany and in Austria, as in both these Member States communal services normally work very well. Especially signing over water supply and wastewater disposal to private companies was severely criticised. As a result, the competent EU Commissioner Michel Barnier backtracked: the three EU institutions have now agreed to remove the water-related sector from the Directive. However, the latter will fully apply to all other communal services.
Liberalisation of passenger rail transport at the expense of passengers and employees
However, one has to doubt that the last word has been spoken on the subject of water, if one takes a closer look at public passenger rail transport: in January this year, the European Commission published a proposal, which provides for the mandatory tendering of passenger rail transport. This is already the second attempt of the Commission in this matter. However, then its attempt failed because of Council and European Parliament, who wanted the Member States to be able to choose between directly awarding contracts (to the public rain) and tendering. Because the Commission was not able to get its own way then, the new proposal shall replace the current regulation, which is only two years old. Here too, it is obviously not the objective to ensure the best possible provision of the service, but to give a small number of big firms the opportunity to cherry pick - hence, to operate on lines, which are profitable, whilst public rails are only left with the lines, which make a loss. However, this proposal is more than just a profit and loss account: several private operators could make it difficult for passengers to get from A to B in the shortest possible time, because competitive operators will hardly be inclined to coordinate arrival and departure times. The price too is anything else but guaranteed as the example of Westbahn shows. Just recently, the fare for commuters was increased by 2 to 3 € per distance, a significant additional expense for commuters. Employees too will probably suffer negative effects if the Commission proposal remains in its current form: a bidder is more likely to be successful if his calculation is based on young and therefore less expensive employees, compared to others who employ older, more experienced but as a result more expensive workers. It is difficult to say at this stage what the negotiations in Council and European Parliament will bring. However, the fact that since the first draft proposal the pro-business political forces have larger majorities, means that the probability that the Commission will be successful is higher.
What will happen to social housing?
AK EUROPA reported some time ago, that recently worrying developments have taken place in respect of housing. Even though the Commission reassures and says that Member States were at liberty to organise services of general interest and social housing themselves, it got very much involved in the case of the Netherlands, where the question of the income threshold arose, which would allow people to live in council or other social housing. The situation could become precarious for households, whose income is just above the permitted threshold, as they are pushed into the private property sector, which quite often demands high rents for poor quality. According to the Commission, there is no intention to draw up a legislative proposal on social housing. However, in view of the experiences made with public transport or water supply, this is more than questionable.
The Commission was only too pleased to take these wishes on board and invented the so-called “services of general economic interest” as a next step. A definition, which reveals the true opinion of the Commission: it is obviously not concerned with the best possible provision of these public services, but with the economic interest of some companies in these services. In any case, these services are problematic for the Commission, as they concern services, which, in its opinion, could be provided equally well by private companies, i.e. they would be best put out to tender and no longer be provided by the public sector. What the Commission deliberately overlooks, however, is the fact that the primary aim of a private company is to generate a profit; providing the services is thereby only a means to an end. And - in simplified terms - how do I generate a good profit when providing a service? By saving labour costs, by scaling down working conditions and by keeping the quality of the service at such a (low) level, which is just about accepted by the customer. A profit can also be secured by making the service more expensive. In general, however, liberalisations and privatisations of services are not concerned with promoting competition. Normally, the market is divided among a few multinationals in form of an oligopoly, as demonstrated by the liberalisation in the energy sector, in respect of telecommunication or of postal services.
In accordance with its philosophy, the Commission has recently published several legislative proposals, which shall accelerate the submission of the public good through the market:
Tendering communal services
The Council and the European Parliament have just reached agreement on the so-called Service Concessions Directive. This does not concern anything else but the tendering of communal services such as water supply and wastewater disposal, refuse collection, health services and similar public services. The proposal stirred up excitement in particular in Germany and in Austria, as in both these Member States communal services normally work very well. Especially signing over water supply and wastewater disposal to private companies was severely criticised. As a result, the competent EU Commissioner Michel Barnier backtracked: the three EU institutions have now agreed to remove the water-related sector from the Directive. However, the latter will fully apply to all other communal services.
Liberalisation of passenger rail transport at the expense of passengers and employees
However, one has to doubt that the last word has been spoken on the subject of water, if one takes a closer look at public passenger rail transport: in January this year, the European Commission published a proposal, which provides for the mandatory tendering of passenger rail transport. This is already the second attempt of the Commission in this matter. However, then its attempt failed because of Council and European Parliament, who wanted the Member States to be able to choose between directly awarding contracts (to the public rain) and tendering. Because the Commission was not able to get its own way then, the new proposal shall replace the current regulation, which is only two years old. Here too, it is obviously not the objective to ensure the best possible provision of the service, but to give a small number of big firms the opportunity to cherry pick - hence, to operate on lines, which are profitable, whilst public rails are only left with the lines, which make a loss. However, this proposal is more than just a profit and loss account: several private operators could make it difficult for passengers to get from A to B in the shortest possible time, because competitive operators will hardly be inclined to coordinate arrival and departure times. The price too is anything else but guaranteed as the example of Westbahn shows. Just recently, the fare for commuters was increased by 2 to 3 € per distance, a significant additional expense for commuters. Employees too will probably suffer negative effects if the Commission proposal remains in its current form: a bidder is more likely to be successful if his calculation is based on young and therefore less expensive employees, compared to others who employ older, more experienced but as a result more expensive workers. It is difficult to say at this stage what the negotiations in Council and European Parliament will bring. However, the fact that since the first draft proposal the pro-business political forces have larger majorities, means that the probability that the Commission will be successful is higher.
What will happen to social housing?
AK EUROPA reported some time ago, that recently worrying developments have taken place in respect of housing. Even though the Commission reassures and says that Member States were at liberty to organise services of general interest and social housing themselves, it got very much involved in the case of the Netherlands, where the question of the income threshold arose, which would allow people to live in council or other social housing. The situation could become precarious for households, whose income is just above the permitted threshold, as they are pushed into the private property sector, which quite often demands high rents for poor quality. According to the Commission, there is no intention to draw up a legislative proposal on social housing. However, in view of the experiences made with public transport or water supply, this is more than questionable.