Which direction should the public service in Switzerland take?

Which direction should the public service in Switzerland take?

Federal referendum of 5 June 2016

Reflections on the popular initiative “Pro Public Service”

by Dr iur Marianne Wüthrich

One of the referendum proposals on which the Swiss electorate will vote on 5 June is the Swiss popular initiative “Pro Public Service”. The initiative wants public enterprises to first and foremost target the common good instead of mainly aiming to fill the federal treasury. It is above all a matter of the three large national companies – Swiss Federal Railways (SBB), Swiss Post and Swisscom. (Other public service sectors such as water, electricity, hospitals and schools are run by the cantons and communes.)
    Behind the initiative are the consumer magazines “K-Tipp”, “balance”, “Bon à Savoir” (Nice to Know) and “Spendere Meglio” (How to Spend Better).
    Now it should be obvious to everyone that the Swiss Post and the SBB, the two public businesses par excellence, should first and foremost serve the people and not be aimed at generating a return. Interestingly, however, the popular initiative “Pro Public Service” is rejected by all political actors in unison: In the final vote on 25 September 2015 the National Council with 196 to zero votes recommended voters to reject the initiative, and the Council of States counted 43 to zero votes for recommending rejection. Vote results of this kind are extremely rare. Consequently, all political parties have agreed to vote against the initiative, as have the most important organisations, i.e. the Swiss Federation of Trade Unions (SGB), economiesuisse etc., and also the SGV (“Gemeindeverband”, Association of Swiss Communes), the SSV (“Städteverband”, Union of Swiss Cities and Towns) and the SAB (“Schweizerische Arbeitsgemeinschaft für die Berggebiete”, Swiss Working Group for Mountain Regions).
    So what does the people’s initiative “Pro Public Service” want? Why is it so fiercely fought? In order to tackle these issues, it is necessary to first reflect on the true meaning of public service, ie the primary care guaranteed by the state, in order to deal with the current situation and possible future developments.

Text of the initiative

Art. 43 b Principles of basic services by the federal government

  1. In the field of primary care, the federal government does not strive for profit. It dispenses with the cross-subsidization of other administrative areas and has no fiscal interests.
  2. The principles referred to in paragraph 1 shall apply mutatis mutandis also to companies that have a legal mandate in the field of Federal basic services or are controlled directly or indirectly by the Confederation through majority partici-pation. The Confederation shall ensure that salaries and fees of the employees of these companies do not exceed those paid by the federal administration.
  3. The law shall define the details; in particular, it delineates the basic services as separate from the other services and ensures transparency on the cost of basic services and the disposition of the corresponding revenues.

The demands contained in the initiative

The promoters explain the three basic demands of their initiative in a generally intelligible way:

  1. “Public enterprises shall aim at promoting the welfare of the population and not strive for the highest possible profits for the Federal Treasury. Good service must be more important than profit.
  2. Profits are to be retained in the federal enterprises and to be reinvested there for maintenance and improvement, i.e. railway profits for the railways and postal profits for the post. Today, however, all surpluses are transferred to the federal treasury. Hence, the initiative streng-thens the federal enterprises.
  3. The higher salaries in federal enterprises should not exceed those in the federal administration. It is incomprehensible that federal councillor Doris Leuthard earns 475.000 Swiss Francs per year, while her de facto subordinate Andreas Meyer (CEO SBB) has twice as much, namely 1,046,186 Swiss Francs and Swisscom CEO Urs Schäppi (Chef Swisscom) even makes 1.832 million Swiss francs, which is three times the amount. Especially since it has been proven that the performance of a manager does not improve as his salary rises. [...]” (http://proservicepublic.ch)

Press ahead with globalization or slow it down?

Opponents argue that an acceptance of the initiative would restrict entrepreneurial freedom and competitiveness, and a waiver of profit in basic services would stifle innovation and ultimately weaken public service (Also see the interview with Professor Schweizer on page 2 of this newspaper). Moreover, Doris Leuthard threatened, a lack of dividends from Swisscom (580 million francs) and post (200 million Swiss Francs) might lead to tax increases and performance degradation. Most of the voices critical of the initiative express themselves in the same or a similar vein.
The fact is: Today the Swiss Post, SBB and Swisscom are public companies distributing dividends to their shareholders.
The shares of Post and SBB are – “still” – completely in the hands of the federal government, says Doris Leuthard. The SBB makes no profit but is subsidized by the federal government. The post only makes a small profit with the mail and parcel transport – despite high prices for parcels! – but PostFinance is an exception, as besides the basic services (payment transactions) it also offers all banking transactions in its portfolio. Swisscom is – so Mrs Leuthard – “a listed company, of which the federal government still has more than 50% [of shares]; but there are about 73,000 other shareholders, which would also be affected by the initiative. With such a setting, the creditworthiness of the company would decrease, i.e., its stock would lose value.” (Media Conference of 5 April 2016)
Comment: The liberalisation of Swiss Post and SBB, two former federal administrative departments, is well advanced. Swisscom is in the stock market, which means that it has to make high profits, in other words, it is under the thumb of the globalized, “free” market. The monopoly of the Swiss post in the letter and parcel carriage business was attacked violently under the pressure of the liberalised EU market, but also by Swiss business leaders; it has successively been degraded to a residual mini-monopoly for letters up to 50 grams of weight, and even this remnant is being violently attacked by economiesuisse: “The Federal Council wishes to retain the residual monopoly on letter mail. In this way it will cement the superiority of the state post and paralyse competitive dynamics in the Swiss market. Business customers will pay the bill. Economie-suisse does not agree with this view and demands the immediate opening of the market”. (economiesuisse on 18 September 2015; http://www.economiesuisse.ch/de/node/40699)
This is where the popular initiative “Pro Public Service” comes into action with its first claim, namely that public enterprises should aim at the benefit of the population and not at the highest possible profits for the Federal Treasury.
 Why not take a pause and reconsider the development of recent decades? Do we want to propel the still relatively good Swiss public service by leaps and bounds further into the liberalisation trap, into privatisation and globalisation? Or should we remember the co-operative basic idea of a public service aimed at the common good? We say: Sometimes it is advisable to recollect ones roots.

The Swiss Post

The Swiss Post (die Schweizer Post, la Poste Suisse, la Posta Svizzera, la Posta Svizra) is almost as old as the Swiss Federal State. The Federal Postal Administration was established on 1 January 1849 and replaced the previous cantonal postal administrations. Thereby the federal government obtained the monopoly for transporting letters, packages, people and remittances and in return guaranteed reliable comprehensive and inexpensive service for the population. From 1906 on there was a National Giro Service, the forerunner of today’s PostFinance. In 1920 postal, telephony and telegraphy services were brought together under a common administration and had been called PTT.

Telephone charges and cashless payment transactions financed all postal services

In the period after the Second World War making phone calls has in fact become a “national sport”; in 1948, Switzerland already had 500,000 telephone subscribers, in 1959 their number reached a million. In the same year the Swiss telephone network became the first fully automated network in the world.2
At this point, older age groups recollect – fortunately, because this information is not readily available on the web! – how the PTT worked as a federally administrated public business – with the enormous surpluses earned by telephone charges and cashless payment transactions the PTT was able to finance all its other departements without any problems. So the postage for letters and packages remained low, every little village had its own post office, and the post buses went even to quite remote mountain villages. Thus it was possible to guarantee an excellent public service for everyone. Today we would say that the PTT’s necessary investments and innovations were cross-subsidised by the surpluses of individual departments.
Then the spirit of liberalisation came upon Swiss politicians: The optimally yielding telephony department was separated from the rest of the post in 1998; the Swisscom Corporation was founded and gradually partially privatised. The Confederation currently still holds somewhat over 50% of the shares. However this share may quickly fall below half on the stock market, if that is the Parliament’s wish.
The Swiss Post has also become a corporation since 1 January 2013. The Federation still holds 100% of the Swiss Post AG shares – until now! But the choice of the legal form of a corporation suggests that there are plans for a gradual privatisation. Although the Post brings large profits to the Federal Treasury, its services are being industriously cut back on: “In the last 15 years 1,800 post offices – more than half of all post rooms – have been closed.”3
Many villages are seriously affected by no longer having a post office, because its own post office as well as its own village shop and its own primary school are important components in the formation of a Swiss village’s identity. Federal Councillor Leuthard’s assertion in a media conference that the post offices are being closed because people write emails instead letters, is simply wrong: in 2015 the post carried 2.172 billion addressed letters and over 115 million parcels. Any seasoned postman asked about this would reply that he has not noticed less correspondence yet ...
The profitable cashless payment transactions were spun off to the PostFinance AG, a subsidiary of Swiss Post AG, in 2013. Nobody guarantees that the PostFinance AG will not, like Swisscom, land on the stock exchange one day and be at least partly left to the free market ...

SBB

On 20 February 1898, the Swiss electorate agreed with 386,634 against 182,718 votes to the acquisition of private railways by the federal government and the founding of a “Schweizerische Bundesbahnen SBB” (Swiss Federal Railways). The SBB was founded in 1902 and has since successively set up its infrastructure for a nationwide public transport, along with other railway companies, with the post office, shipping companies and mountain railways.
In 1999, the SBB was spun off from the Federal Administration and has been an incorporated company ever since.
But even today, there are also numerous private railways in operation in Switzerland, which are, as a rule, run by private limited companies. Many of them are narrow-gauge railways, so that they cannot run on the SBB railway network, but they are fully integrated into the SBB timetable. For most private railways, the cantons have the majority of shares. For instance the Appenzell Railway has been in existence since 1875, has been merged over time with other eastern Swiss private railways and is now called Appenzell Railways. This is a corporation owned by the Confederation, the cantons of St. Gallen, Appenzell Outer Rhodes and Appenzell Inner Rhodes, the city of St. Gallen, various other cities and communities, as well as private shareholders. The Rhaetian Railway as a second example. This is however not a private railway, but became the Grisons state railway after a referendum in 1897.
As to the service provided by the SBB: It is well known that train tickets and the one-year passes are becoming more expensive. Likewise, every commuter knows that during peak times there is not enough seating provided in the express trains connecting towns and cities – if one cannot afford a first-class pass for 5,970 Swiss Francs per year. And anyone who does not know how to work the ticket vending machines may well miss his or her train because there is no one there who to help or advise him. Thus there is some need for action even for the SBB to provide better public service ...

Conclusion: “Pro public service” – a pause for thought in this era of globalisation and TiSA

Even the provision with basic supplies should have to “be able to keep up with trends such as digitisation, globalisation [...].” The necessary innovation and investment would be prevented by the initiative. “Further liberalisation is indicated, more than the present market and competition is necessary, not less,” says Regine Sauter, national councillor of the Zurich Free Democrats, president of the Zurich Chamber of Commerce, at a press conference on 5 April 2016.
What do our basic services have to do with globalisation? What place do our postmen and our railway staff have abroad? Which are the innovations and investments Ms Sauter and other business leaders are thinking of?
Is this an example? “In 2007 Swisscom forked out around 7 billion francs for the acquisition of the Italian telecommunications company Fastweb. This purchase is increasingly becoming a major flop. Present low point: the billion-francs-write-off of last December, which reduced Swisscom net income by around 1.2 billion Swiss Francs”.4
Remember what Mrs Leuthard said at the press conference? At federal and cantonal level everyone was very happy about the high taxes paid by Swisscom. Together with the Swiss post, it had delivered half a billion francs of taxes on income in 2015. If it paid less, the Confederation and the cantons would have to raise taxes or cut spending ...
Well well – and what about the 1.2 billion that have seeped into the global market?
The popular initiative “Pro Public Service” thankfully gives us citizens the opportunity to take a pause and to return to the direct democratic and cooperative principles, with which we have always fared well in our political system. A Swiss public service company may not use the capital the taxpayers have entrusted it with for speculative transactions or expansion abroad.
A word on salaries: An SBB or Swiss post CEO should not take up this position merely on account of the high salary. If the many municipal councillors and school administrators accepted their mandates only for the payment, we would have to chuck up the sponge. Because most of them are paid much higher wages in their regular occupation than in their part-time commission. And those who engage themselves at a full-time level – like most cantonal government councillors – would probably earn a lot more in the private sector, given their training and professional experience. Direct democracy does not only confer rights, but also duties; and we all have to help carry the responsibility for the whole thing, the entirety.
Finally let me mention a very central argument that has up to now hardly been put in the balance. If the Initiative Pro Public Service is accepted by the Swiss people, this means a clear ban on the tie-down of Switzerland to TiSA, which is being planned by the Federal Council: The risk that all service areas including primary care – the exclusion of which has not been credibly established – would be thrown into the insatiable maw of global conglomerates, might for now be averted. Slowly the balance is inclining towards the other side.     •

1    (https://de.wikipedia.org/wiki/Die_Schweizerische_Post)
2    (http://nachsendedienst.ch/die-geschichte-der-post-in-der-schweiz/)
3    (http://proservicepublic.ch)
4    (http://proservicepublic.ch/index.php?id=15)

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