26 minute read
Prices and people: Community perspectives on infrastructure reform – panel discussion
Prices and people – panel discussion Prices and people: Community perspectives on infrastructure reform – panel discussion
Chair: Panellists:
Brendan Lyon, Chief Executive Officer, Infrastructure Partnerships Australia • Ian Holland, Director, Services Development, UnitingCare • Michael Traill AM, Chief Executive Officer, Social Ventures Australia • Catherine Yeomans, Chief Executive Officer, Mission Australia
Key points:
• Effective economic and social infrastructure is a key consideration for vulnerable and low-income households. • The privatisation of public assets should be considered in terms of wider social impacts, and should be structured to deliver long-run community benefits. • The role of the not-for-profit sector will enlarge, as governments seek new models to drive efficiency into social services costs. • Social benefit bonds and ‘full service’ social infrastructure PPPs offer new opportunities to drive innovation and improvement into the social sector.
Brendan Lyon (BL): We talk a lot about reforming infrastructure markets, reforming services markets, asset privatisations and other things, and often, the unspecified impact on the vulnerable is used as a reason not to reform, and therefore used as a block for privatisations and other things. Can each of you give the audience a sense of your own engagement in the industry, and your own outlook in terms of some of these issues?
Catherine Yeomans (CY): Mission Australia is one of Australia’s largest community services organisations. Last year, we worked with over 300,000 vulnerable and disadvantaged people across the nation. Our focus is on reducing homelessness and strengthening communities, and we do that by offering integrated services. We offer housing and homelessness services, we help the long-term unemployed find employment, and we work with a number of members in our community who are at risk, such as young people or young children in families, as well. We are also a community housing provider. We have over 2000 homes that we own and manage, including the $32-million Camperdown development in New South Wales. We are focused on delivering evidence-based programs to meet community need and to advocate to governments, and to influence public policy that impacts on the people that we work with.
An issue that we can’t ignore is the number of homeless people across Australia. On any given night, we have 100,000 homeless people.
In Victoria, between 2006 and 2011, the homeless population grew by 20 per cent, and it is currently at 22,000. Australia’s unemployment rate is around six per cent; youth unemployment has just dipped below 14 per cent. There are 220,000 people on the queue for public housing across Australia, so we have a chronic shortage of social and affordable housing across the nation.
BL: Michael, your views?
Michael Traill AM (MT): At Social Ventures Australia (SVA), we sometimes get described as a group of reformed investment bankers and strategy consultants. I was a proud part of Macquarie Bank for 15 years, where I was involved in setting up the bank’s private equity business in the late 1980s.
At SVA, we have a national team of 60 people, and our goal is to try to provide, in sensible and sensitive ways, business and private equity disciplines to address some of the country’s entrenched problems of social disadvantage, and we think that capital access is a critical part of that. In fact, Mission Australia has been a partner in one of the most interesting initiatives over the past five years, where we put together a syndicate that raised $165 million, comprising a capital cocktail from government, from private investors, and from a conventional commercial lender, to acquire the failed assets of the ABC Learning childcare centres (now known as Goodstart Early Learning). Now, that organisation is an $800-million social enterprise, which is really trying to address one of the pivot-point issues around early learning and care.
We have to think differently about capital access for issues of entrenched social disadvantage. While it’s early days, social benefit bonds are a small-scale example of what can be achieved. They have financial parameters that would appeal to the infrastructure sector – returns of eight to 12 per cent – and if we do that intelligently and in partnership, we can actually move the dial in terms of the funding that is available.
BL: And Ian, your opening views?
Ian Holland (IH): UnitingCare Australia represents the UnitingCare network of service providers. We are one of the largest employers in this country with 39,000 employees, supported by 28,000 volunteers, and that network is delivering services in aged care, residential home and other disability services, early childhood education and care, families-at-risk diversion programs, emergency relief, counselling, and a few other things. About the only area in which we are not a big player is housing.
We are a very large enterprise that is engaging with a very large number of people. It is an enterprise in which social capital is our primary investment. We have a large workforce and we are highly engaged with families and individuals around community engagement and participation.
We also have an interest in other dimensions of capital, and two aspects that interest us at the moment are the transition in the aged care system that is being driven by recent Commonwealth reforms, and the future demand for care and how we, as one of the country’s largest aged care service providers, are going to meet that future challenge.
We are interested and involved in innovation in investment for social good, including the projects that Michael has referred to. One of our service deliverers was involved in the first social benefit bond operation in New South Wales, which recently reached its first anniversary and the first time that benefits were measured, which were thankfully
Below: Catherine Yeomans, Mission Australia; Michael Traill AM, Social Ventures Australia; Ian Holland, UnitingCare
Right: Catherine Yeomans, Mission Australia
positive for both the investors and for the families that the investment was designed to support.
UnitingCare Australia is also heavily involved in advocacy on behalf of the people we work with, and one of our greatest areas of engagement at the moment is Commonwealth proposals – current, future and rumoured – in relation to welfare reform and how they are going to tie into the Commonwealth’s vision or otherwise around its budget.
BL: As I mentioned earlier, the impacts on the vulnerable are often used by people who are opposing reform. How can the reform debate be better cast so it focuses on the outturn? How can that debate be taken forward, and how can your organisations play a more direct role in discussing the first principle outcomes?
CY: In any situation, we have to actually think about the impact on everybody in our community, and not lose sight of the fact that, as you mentioned, we do have vulnerable and disadvantaged people in our community.
From Mission Australia’s perspective, we are less caught up on who owns assets and who doesn’t own assets. We are more interested in what the financial impact on the people that we work with actually is. The people that we work with often have less ability to have discretionary expenditure, so any increase in cost is going to have a direct impact.
BL: So they are more price-exposed?
CY: Absolutely. So we need to take that into account. I’d suggest that if you are in infrastructure, you are actually in the human services sector, because if you haven’t actually got people using your hospitals, or your schools, or your roads, or any other form of infrastructure, then why on earth are you building it? You need to think about the impact that it is going to have on the communities, on the people, and certainly whether we are strengthening communities and building families, or whether we are perhaps putting in place inhibitors and roadblocks, for want of a better analogy.
MT: Catherine’s earlier point about trying to be clear about the evidence base is pivotal. Having heard Jeremy Maycock (Chairman of AGL) speak earlier [see page 70], you would say there’s a pretty compelling argument about the inefficiency of government ownership of an asset. For what it’s worth, I grew up in the Latrobe Valley, which is now an area of disadvantage. As a university student, I sustained myself working with the Builders Labourers Federation, when, in that area, there were 27,000 people employed and you were told to go slow on Thursday and Friday to get double time on Saturday and triple time on Sunday. While that gave me beer money at university, it was a pretty defining lesson in the inefficiency of the operating structure.
Now, there are 9000 people employed in that area, with huge and damaging social consequences, but necessary efficiencies. I’m a sufficient believer in the free market to think that, while what happened in the Latrobe Valley is a social tragedy, it is probably an economic necessity. We have to do a much better job of addressing the social needs around employment training, relocation, and, really, whatever it takes so that that community should not have been hollowed out like it was. But we need a much clearer focus about what happens in the long term when we look at these things. The impacts are both economic and social.
BL: So, a much clearer up-front consideration of the impacts and mitigations than perhaps what we have seen?
MT: I think it is on two fronts. You have to have a long-term view but, in our view, where governments fall down a little bit is in not recognising the need for sensitive implementation of structural adjustment.
BL: Structural adjustment?
MT: It’s easy to say at a high level that structural adjustment is painful, deal with it and get on with it; but for service organisations like Mission Australia
and UnitingCare, when you see that up-front, if that’s not well supported and resourced, you do enormous long-term social damage.
IH: Our organisation’s engagement in the sort of context you’re talking about particularly relates to the energy sector where we deal, through our emergency relief and other support agencies, with energy poverty and people unable to pay utility bills, so we have a very healthy interest in energy pricing in some of Australia’s states.
The real issue we see is one of information asymmetry. Are regulators and businesses going to engage in meaningful attempts to address the information asymmetry that makes it very hard for consumers to trust utilities that they don’t understand, and really struggle to engage with, just in economic terms? And that trust issue goes to a broader question, which is: what does a good process in, for example, a privatisation, look like?
BL: What does a good process look like? Let’s use New South Wales as an example. It has a committed policy, so what would you like to see in terms of a process of the allocation of proceeds? What are the gateway filters?
IH: If people want to see greater consumer engagement and confidence, and general public acceptance of that sort of privatisation, the key is trust. The difficulty is that it is not trust in us as service delivery organisations in the social space, and, unfortunately, it is not trust in treasury officials, or indeed trust in the companies that might wish to purchase the assets – all of which might be working very hard and very sincerely to pursue the strong case that is made around price in New South Wales. The difficulty is trust in the executives, the decisionmakers who will define the privatisation process.
What you want in a state government executive that is going to carry a process like that forward is a long-term view around infrastructure, and not being driven around deficit reduction. You want longterm rather than short-term perspectives. You want a high level of expertise. You want commitment and resourcing of regulators that are fully independent and that are showing and exercising for driving down
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Right: Michael Traill from SVA prices and rate of return margins in a relatively lowrisk industry. Those sorts of issues present a profound barrier, and I don’t want to be pessimistic about it, but I think that there is a limited role for us in trying to drive a change in the way that state executives, in some circumstances, pursue those issues.
CY: I would speak less of the actual process, in terms of the privatisation. From Mission Australia’s perspective, we would like to focus on what choices are made around the proceeds from those sales. So, if we are actually privatising public assets, why are we doing it? What is going to be the social return? Are we really thinking about the long-term investment that is required? For example, in social and affordable housing, we really believe that homelessness can be solved with a housing first approach, by actually creating homes for people, and then with some social infrastructure investment as well, developing the programmes that actually work with people to help them to sustain their tenancies.
We’ve demonstrated that this can be done, and it makes a good social investment, as well, because it will relieve the government of costs into the future. It will also relieve costs on the public health system, emergency care, the justice system and crisis accommodation, so it makes good economic sense. So, we would like to be part of the partnership, talking about what we do in terms of future investment for our communities.
BL: Electricity reform in New South Wales is quite a substantial opportunity – you are talking about tens of billions of dollars in windfall funding opportunities. Where would you see that usefully applied? Transport is going to be a major focus, both for social and economic reasons; however, beyond that, what do we need to see?
CY: In terms of participation in the workplace, we can’t ignore the rate of youth unemployment and investing in programmes that are going to help young people to make the transition – either staying engaged in education, or making the transition from education into the workforce. Those social infrastructure investments are very important. There are also other investments that we can make, but I’ll leave my other panellists to speak to that.
MT: I think that the opportunity is to invest in places where there’s clear evidence on costs and outcomes, and Australia doesn’t have a great track record of that. If you look at education, which has been a focus post-Gonski Report, the reality is that since 2000, there has been a 45 per cent increase in real spending, and, at best, our results in terms of any objective by the Organisation for Economic Cooperation and Development (OECD) and Programme for International Student Assessment (PISA) have gone sideways and backwards, both at the top end and in terms of addressing the significant disparity between the top 25 and bottom 25 per cent.
So, to Catherine’s point, our interest in policy engagement is to help to be clear and explicit around the measurement of social outcomes, and there’s a nexus always in those things between the social and economic. That’s what stood at the very heart of the Goodstart acquisition of ABC Learning childcare centres. All of the four social purpose partners recognised that the most powerful investment you can make is in the early years, when a child is aged up to five years old. If you invest early with a young child from challenging circumstances, you change the social and economic trajectory of their lives, and there is not enough of that long-term analysis, which is in part accentuated because we’ve got terribly short political cycles, particularly federally.
BL: Asset sales are a real feature of today’s discussion because of the sort of reinvestment
opportunities that they free up. But once you get past the sugar hit of that liberated capital, we have to face a much longer-term situation in Australia around rebalancing revenues to expenditures. We need to make social services delivery more efficient and more effective, because we do have demographic shifts that are changing the ratio of the amount of working people to the amount of people that need to be supported. That is going to have huge potential ramifications for you, not only as community advocates, but also as very large businesses that operate within this third sector that delivers services to the community. If you are looking at things like driving contestability into the delivery of government service programmes, particularly in the delivery of correctional services, social housing and others, there’s a profound opportunity for your sector. How do you see that discussion developing over the next few years?
CY: In terms of contestability, we are already in this space. We provide a number of services that are funded by federal and state governments.
BL: Do you see this as a growth area for your business?
CY: Certainly I see it as a growing area, in terms of the preference for government to secure the delivery of services via a contestability model, if you like; so, large tender processes. Those tender processes actually drive behaviour. If you are running a competitive tender process, the way in which people or organisations engage in that process is going to be driven by the process. So, there are short time frames, there are probity issues, there are restrictions on what you can and can’t do with your competitors, or what we would describe as colleague organisations in the sector. If, at the same time, what government is asking for is collaboration and innovation, those factors are not necessarily being represented in the way that a tender is actually released to market. Though we have some intention, and some dialogue around what the aspirations of government are in what this service delivery looks like, we have a tender process that actually delivers the outcome that one would expect in this type of procurement process.
If we actually think about strategic sourcing and are really clear about the outcome we would like to achieve by service delivery, then I think that a much more effective process could be run, in this space, by looking at strategic sourcing.
Again, it has an impact in terms of the number of players in the market, if you like, or the way that service providers, like us, need to organise themselves. If it is actually about price or the cost of service delivery, we need scale, and we need to be able to leverage. If, at the same time, we want small players, we want niche players, we want to transfer all the risk, but we want to do that to a very unsophisticated organisation, then these things are actually not necessarily sitting neatly together. We need to determine exactly what we want out of the process, and we need to design the process that is going to deliver that result.
BL: Michael, do you see an equity plus altruism model entering into this sort of area?
MT: I think that’s possible, and to Catherine’s point, I do think that in the social purpose space, there are serious limits to contestability. It sounds great, but as students of country systems elsewhere, particularly in education where the trajectory of performance has changed over a decade, it is actually about collaborative sharing of best practice, and pure contestability does not lend itself to that particularly readily.
If you look at social benefit bonds, they tap into what matters in terms of some of the things that
Left: Ian Holland from Uniting Care
Below: Catherine Yeomans, Mission Australia, and Michael Traill AM, Social Ventures Australia Catherine mentioned around accessing different sources of capital, recognising that service provision is critically important, and having an outturn that is a win for government, as well.
The way these work: UnitingCare developed a fabulous program called Newpin that reconnects foster care children, aged zero to five, with their birth parents through an intensive therapy programme. The economics of that are utterly compelling. If that child is reconnected with their birth parents in a stable and loving family situation, it saves the taxpayer and state $100 per day, and around $36,000 per year. If you do your net present value calculation of that, it’s close to a couple of hundred thousand dollars.
The private funder takes the risk that it won’t work, so you can do your dough if you invest in that programme. But if it does work, out of those savings, the Government repays the funder, provides working capital for UnitingCare to run a pilot programme for which they might otherwise struggle to access capital, and the investor gets a reasonable return. As Ian said, we just announced the first results of those after a year – it’s early days – but there was a 60 per cent key performance indicator reconnect rate, compared to what otherwise might happen, which is probably in the order of 20 to 25 per cent. So, you can see that this is forcing accountability, based on long-term outcomes. Government is not second-guessing how the programme is delivered, and for UnitingCare, it has been a win.
We believe that clarity on outcomes, quantification of costs and returns, and ensuring that government has a clear place to play, but not actually intervening in the process or programme delivery is incredibly powerful. And there is a lot of work being done in other countries – New Zealand is doing this well.
BL: Like the Wiri prison procurement (in Auckland), that sort of approach?
MT: Yes.
BL: Ian, do you see this as a theme?
IH: I agree with Catherine. We have been involved in bidding processes and competitive tendering processes for a very long time. Whether it is bidding for aged care beds in a kind of tendering and assessment against criteria process, or whether it has been a straight-out competition against a set of fixed
criteria for the delivery of a particular programme, we have been doing this for years. I think that we are entering a phase of some incoherence in the thinking behind what is going to happen next, and Catherine picked up on that.
Are we supposed to be competing in this tender, or are we supposed to be cooperating? You are telling us to do both, and you are telling us to do it in five weeks. We are in a difficult transition, and I think that one of the risks for government and for the finance sector is that the concept of tendering could come out of this looking pretty bad. So, I think that there are some risks there, to the future of tendering, rather than the other way around.
From our organisation’s point of view, the big issue is with the premise of some of this. We are having an awful lot of discussion in this country around our expenditure problem. This country has an expenditure problem, but it is not a very important one. We have a revenue issue in this country, and we are not talking about that sufficiently. Our organisation is very keen to have a discussion about revenue, about tax expenditures, about the income tax system, and about actually matching the revenue side with what most Australian people would like to see in service delivery. I am listening for the sound of that approaching conversation, and I haven’t heard it yet, but I am sure it is coming.
BL: In the audience today, we have major equity and debt investors, and major regulators from right across the nation’s Federal Government and state governments. In terms of dealing with the insubstantial or the asymmetrical call on the amount of public money compared to the amount of public capital and public services that need to be delivered, what would you say is going to be the hallmark of the next few years to start to break through on the funding impasse on public sector budgets? How do we approach this problem in a sensible way?
CY: We need to look at the evidence. You need evidence-based policy development. You need a breadth of views around the table, so we need to engage organisations like Mission Australia and others in the community services sector, government, other sources of funding and organisations that are actually going to be responsible for the infrastructure. There is still a very important role for government, in our view, but organisations like ours have a level of sophistication. We have a level of experience in this space for the users, if you will, of the infrastructure, for the people who will be engaging in infrastructure. If we really want to strengthen communities, then we have to come together around this issue and really be a partnership.
BL: Michael, the role of government: skilled purchaser and regulator rather than necessarily default provider? Or is there some other way?
MT: The mantra for us is to engage with government in sensible partnership. The three things that we think matter are: firstly, a preparedness to have a long-term focus. That doesn’t exist enough. Secondly, an explicit focus on outcomes, not activity measures, not busyness indicators. And finally, to secure mainstream investment. Goodstart and, in a different way, social benefit bonds are bellwethers for what is possible in getting mainstream industry fund and superannuation fund participation in sensibly structured, social purpose impact investing. If you do the maths on what is possible, two per cent of a $1.85-trillion market is $35 to $40 billion to do some seriously outcomesfocused social purpose work with a recognised impact investing asset class.
IH: I would add that one of the messages would be transition. The key challenge with social benefit bonds, from where we sat, was the expense and difficulty of developing the model to implement.
If we want to see the superannuation funds and others investing in this, it will build their credibility – there will be rates of return in these kinds of models, but we’re 10 years away from super funds and other institutional investors being able to put nine-figure sums or upwards into this sort of model. What are we going to do with smaller sums of money out of those sectors, to build the evidence base and provide support for the design of those models so that when they become established, they become settled, we can move forward with those?
Finally, I really hope that there is going to be a discussion in this country around revenue. There are some fairly squeaky wheels, and they are pretty big wheels at the moment, but I am hoping that some of the partners that we work with will take opportunities that they might not normally take, where they don’t need to step up on the revenue issue, but they might choose to, because that will allow organisations like us to then work with them to a greater degree in the future.
Ian Holland, Director, Services Development, UnitingCare Australia
Ian Holland’s career has included more than two decades as a policy developer, researcher, writer and advocate, with a commitment to advancing policies that support the most disadvantaged and marginalised, and that remedy injustice. He has responsibility for UnitingCare Australia’s national advocacy program around the development of services, including for the aged, people with disability, children, young people and families, and in relation to income support justice.
Prior to joining UnitingCare Australia, Mr Holland spent 12 years working in Parliament House – the first two as a researcher in the Parliamentary Library, providing advice to members of parliament, and then 10 years supporting Senate committees. He led the team that prepared the inquiry hearings and report of the Senate Select Committee on Mental Health in 2005 and 2006. From 2011 to 2013, he was secretary to the Senate Community Affairs Committee, during which time he administered inquiries into former forced adoption practices, the National Disability Insurance Scheme legislation, mental health services, and aged care reform.
Mr Holland has qualifications in science from the University of Sydney, and in public policy from the University of New England and Griffith University. He was a youth representative from the Uniting Church at the Assembly of the World Council of Churches in Canberra in 1991, and its Convocation on Justice, Peace and the Integrity of Creation in Seoul in 1990, as well as serving on the Assembly’s National Mission and Evangelism committee in the late 1980s.
Michael Traill joined Social Ventures Australia (SVA) as founding CEO in 2002 after 15 years as a co-founder and Executive Director of Macquarie Group’s private equity arm, Macquarie Direct Investment. SVA is a non-profit organisation that has raised more than $45 million from social investors to fund outstanding ventures and strengthen Australia’s non-profit sector.
SVA helps to create better education and employment outcomes for disadvantaged Australians by bringing the best of business to the social sector, and by working with partners to strategically invest capital and expertise. SVA Consulting shares evidence and knowledge to build social sector capacity, while SVA Social Finance introduces new capital and innovative financial models to help solve entrenched problems.
Mr Traill is Vice Chair of Goodstart Childcare Ltd, Chairman of the Opera Australia Capital Fund, Assetic Pty Ltd, and a Director of M H Carnegie & Co.
In 2010 Mr Traill was made a member of the Order of Australia in recognition of his services to non-profit organisations.
He holds a BA (Hons) from Melbourne University and an MBA from Harvard University.
Catherine Yeomans was appointed as Chief Executive Officer in March 2014. Prior to this, Ms Yeomans served as Mission Australia’s Chief Operating Officer, and during that time held responsibility for functional areas including advocacy, media, marketing, fundraising, HR, legal, IT, procurement and property.
With a law degree by academic background, Ms Yeomans has held senior management roles in a broad spectrum of fields across the corporate sector. She is a Director of Mission Australia Early Learning, Mission Australia Housing, Mission Australia Housing (Victoria) and Many Rivers Microfinance Limited.
Ms Yeomans is passionate about social justice and actively speaks out against inequality on behalf of the people Mission Australia serves.
