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Legislative Assembly for the ACT: 2001 Week 4 Hansard (28 March) . . Page.. 1015 ..

MR STANHOPE (continuing):

The addition of the DUS operations saw Totalcare's work force expand from 250 to 800. The company made a profit of $16.3 million after tax and returned a dividend of $194,000 to the government. Significantly, the transfer of functions from Urban Services saw Totalcare act as project director for the Canberra Hospital implosion.

The linen division successfully tendered for the provision of a full linen hire service to nine private hospitals in the Sydney metropolitan area, creating 40 new jobs. Significantly, in line with what was happening in the Commonwealth public service, the ACT government took a decision to untie Totalcare's government clients after the 1997-98 financial year. In 1997-98 the company made a profit of $8.275 million, but reported that no dividend was returned to the government. However, the following year's report recorded a dividend of $195,000.

In 1998-99 the company made a loss of $2 million and returned no dividend to the government. The work force was down to 660 and $2.9 million was spent on voluntary redundancies. The chairman remarked in the annual report that "today's increased regulatory requirements, down-sizing of government departments and the outsourcing of government contracts, together with the greater competitive nature of the business environment will continue to challenge the company". In 1999-2000 the staff level fell to 546. The company made a loss that year of $318,000 and no dividend was returned to the government. During the year its joint venture quarry at Williamsdale became operational.

There are some significant features in that history gleaned from Totalcare's annual reports. In its formative years of over five years there was a doubling of the divided returned to government. When a range of DUS services were transferred to Totalcare, from that year on either no dividend was returned, or a lesser dividend than in its formative years.

I think the point can be made that Totalcare's problems, or the difficulties in relation to its profitability and its capacity to return a dividend to the government, started when it was forced to be a player in a fully commercial world. They started when the government took the decision to untie the company's government clients. They started and continued as a result of the company being a victim of the Liberal government's blatant ideological approach to outsourcing.

Totalcare was forced into the open market despite the fact that the company has to bear the non-commercial costs of government, and those costs are significant. For instance, in the private sector companies pay seven per cent as a superannuation guarantee levy. Because Totalcare's staff retain rights to public service entitlements, the company pays 15.2 per cent.

Like other government or semi-government agencies, Totalcare carries costs of meeting public disclosure and FOI obligations. Its obligation to report to the parliament through its shareholders, and occupational health and safety responsibilities, are also arguably higher costs for Totalcare than similar demands on its private sector competitors.

Corporatisation was designed as a means to make public sector service providers more efficient. It was designed to make them face up to the market realities of true costs. It was designed to make public sector service providers work smarter. It was not designed, in theory at least, to remove public sector service providers from the market. In reality it

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