Keep the service public in the hands of the sovereign!

This year, for many of us, the festive season over Christmas and New Year will be quieter than usual due to the pandemic. Instead, we will have more time to think about how we humans want to help shape the future of our world, but also of our immediate environment. We Swiss have our strong direct democratic rights to ensure that the Swiss model with its free and cooperative foundations is preserved and can once again increasingly act as a role model. Proposals for further development and adaptation to the needs of the time must always bear strict scrutiny: Does what is planned serve the good of the individual and the community? Do we citizens keep the steering wheel in our hands?

One of the pillars of our cohesion that requires our constant attention is a high-quality public service, which must first and foremost serve the population. “A good public service – the hallmark of Switzerland” is the title of the Federal Department of the Environment, Transport, Energy and Communications (DETEC) information page. According to the Federal Council, public service includes “the basic provision of infrastructure goods and services, which should be available to all sections of the population and regions of the country on equal terms, in good quality and at reasonable prices.”¹ And it is precisely this basic provision that is threatened at its core since two or three decades.

Privatise public service?

Recently, the editor-in-chief of the “Neue Zürcher Zeitung” once again repeated the well-known demand of economic liberalism in an editorial: “A new round of liberalisation is necessary.”² As “justification”, it took up the case of PostAuto AG, which has actually been settled since two years. In brief: The business results of PostAuto AG had been presented worse for years by rebookings in order to receive more federal money. The fact that the “Neue Zürcher Zeitung” did not find anything more recent shows that such incidents are extremely rare in Swiss state-owned companies. Why? One of the great advantages of direct democracy is that citizens keep a watchful eye on federal, cantonal and municipal enterprises, as well as on parliaments and communal councils, because they, in turn, have to guard against the strong political rights of the citizens. Regarding the case of PostAuto AG, it should be noted that no one there worked into their own pockets, but that it was a matter of keeping bus lines alive that did not bring in enough to cover their costs. Nevertheless, it was a question of taxpayers’ money that was not used legitimately, and Swiss Post has to pay this back to the Confederation, the cantons and the communes – everything has already been settled.³
  This example clearly shows that the profit orientation of an AG [public limited company] is incompatible with the basic idea of public service. In the words of the “Neue Zürcher Zeitung”: “After all, the framework conditions set by the Federal Council for public transport [meaning the requirements for public service, mw] cannot be seamlessly reconciled with the profit expectations of the same Federal Council for its transport companies.” And further: “Finally, the state constantly gets into contradiction with itself when it wants to control the companies and at the same time maximise their dividends.”⁴
  The logical consequence of this should be that the public service must first and foremost fulfill its mission to serve the population, without having to constantly chase higher profits. Editor-in-chief Eric Gujer draws a different conclusion: “The model case of the postal yellow balance sheet falsifiers would have been an ideal opportunity to discuss the raison d’être of the federal enterprises.” [emphasis mw]
  This is plain language! How did it get to this point that a renowned Swiss newspaper is questioning the existence of the Confederation’s public service enterprises? And why are the Swiss Postbuses a public limited company in the first place? 

Liberalisation wind with the help of the ban on state aid from Brussels

It is no secret that the EU has no preference for state support of any kind, for example, towards service-public enterprises. The main purpose of the EU’s internal market is, as is well known, the “free” market, which mainly serves large corporations to squeeze into well-functioning national or regional markets. Although Switzerland is not a member of the EU, foreign corporations have been putting the Swiss public service, for example the Post AG, in some distress since two or three decades.
  The EU supports such activities by means of the “ban on state aid”, a real instrument of destruction of national and local structures. According to Article 108 of the “Treaty on the Functioning of the European Union” of 13 December 2007 and the corresponding interpretation by the European Commission, state aid “for example in the form of grants, interest rate subsidies or tax exemptions, guarantees, state participation in companies, the provision of goods and services on preferential terms” is generally not permitted. If the Commission concludes that an aid could “affect interstate trade in the EU” and lead to “distortions of competition,” “the Commission must prohibit the aid – unless it can be shown to be compatible with the common market.”⁵ [emphasis mw]
  For Switzerland, this ban on state aid is already having an impact today. One of these is the conversion of public service enterprises into public limited companies under private law, another is the exclusion of small hydroelectric power plants from state subsidies.⁶ For the future, far more serious consequences are to be feared if Switzerland were to conclude the framework agreement with the EU and thus be forced to adopt EU law in numerous legal areas.

As a joint stock company, ready for the “free” market:
Example of the fragmentation of the PTT

It has already been discussed here several times that certain circles in Switzerland unfortunately do not try to curb this questionable development, but conversely promote it. Forces in the federal and the cantonal administrations, but also in politics and in business associations, which primarily represent the interests of large corporations, are pushing for the fundamental reversal of polarity in public service enterprises. The Post, the SBB (Swiss Railways), the hospitals, hydropower are to be increasingly subordinated to economic goals; instead of the common good, the focus is on returns. Rural hospitals are being closed despite the clear need of the population because they are “not operating profitably;” post offices have been closed for years against the resistance of the population with the “justification” that the post office counters are hardly used any more anyway (which is not true), etc.
  The Swiss Post, for example, was called “PTT” (Post, Telegraphy and Telephony) until 1998 and has always been strongly anchored in the population. This close interaction worked perfectly: the high surpluses of telephone calls (the PTT had the telephone monopoly) financed the deficits of letter and parcel post, which was delivered punctually and reliably to every household, even in the many remote mountain valleys – a real public service. The post bus lines reached every village that was not on a railway line, although not yet at half-hourly or hourly intervals. Thanks to postal payment transactions (PC accounts), there were more than enough savings available for investments in new post offices or postbuses.
  Under the external influences described above, the federal authorities began to split up PTT in 1998: the profitable telephone division was spun off and went public as Swisscom AG, with the Confederation retaining more than 62% of the shares – in order to generate dividends for private individuals instead of using the profits to serve the general public. In the “free” market, of course, there was no longer a telephone monopoly, but global competition entered the lucrative Swiss market within a short time. The second profitable division of Swiss Post, postal payment transactions, became a public limited company under private law in 2013 as PostFinance, which is still part of Swiss Post, i.e. wholly owned by the Confederation, but keeps its own accounts. What remained were the letter and parcel post and post bus services, which everyone knew would run deficits without cross-financing from telecommunications and postal payment services. Today, PostAuto AG is also a subsidiary of Swiss Post AG, and its shares are owned by the Confederation. After the 1998 split, suddenly left on its own, it was expected to make profits to keep weakly staffed lines alive, the account transfer described at the beginning occurred.

The sovereign does not want privatisation of the public service

The legal form of most public service enterprises no longer indicates whether they are state-owned or privately owned, as almost all of them have been transformed into private-law companies in the last 20 years. As a public limited company, the public service enterprises have one foot in the door to privatisation, even though there is considerable resistance to the sell-out of self-sufficiency. Fortunately, this will not take place without the consent of the voters.
  Direct democracy also has an important braking effect on the telecommunications company Swisscom: in 2006, the Federal Council wanted to sell the Confederation’s majority of shares and thus privatise Swisscom completely. That would have flushed about 17 billion Swiss francs into the federal treasury (which Switzerland, with its relatively solid budget, does not need at all). Both the National Council and the Council of States did not support this proposal – although both councils did so by a narrow margin (99 to 90 and 23 to 21 votes respectively). As a result, the Confederation has retained a majority of shares in Swisscom to this day. Several members of the Council of States who were opposed supported the attitude of many Swiss towards the sovereign handling of the public service. Filippo Lombardi (CVP, Ticino), for example, insisted “that the telecom infrastructure must remain in Swiss hands,” and Simon Epiney (CVP, Valais) called on the Federal Council to face the question “whether a state monopoly might not be followed by a private one.” The parliamentarians also had opinion polls with them, according to which “a full privatisation in the sense of the Federal Council [in the referendum] simply has no chance” (Peter Bieri, also CVP, Zug).⁷
  Ten years later, summer of 2016, Council of States member Ruedi Noser (FDP, Zurich) made another attempt at the total privatisation of Swisscom, but withdrew his motion in autumn because it would have had no chance in the Council debate – and according to a new survey, also in a referendum.⁸ Neither the insistence of economiesuisse and other domestic advocates of the borderless “free” market helped, nor an OECD study according to which “no other country in Europe is as hostile to privatisation as Switzerland.” The OECD’s chief economist even predicted that Switzerland’s allegedly too low growth would be “insufficient to finance future government spending”(!) and recommended privatising Swisscom, among other things, as a shock therapy.⁹ Why does this not work, despite all the prophecies of doom? “The big difference: in other countries, it is not the people who have the last word,” the “Bilanz” notes soberly.

Public service as a red line for a framework agreement with the EU

Thanks to direct democracy, there is still hope that our good public service companies cannot simply be sold to the highest bidder. But we citizens must remain vigilant: the next red line for our state system will be the framework agreement with Brussels and also on the question of public service.
  With this in mind, the Conference of Cantonal Governments (CCG) in March 2018 took an extremely critical position on the numerous traps of EU state aid law that a framework agreement and the associated adoption of EU legislation would have for the sovereign organization of public service by the Confederation and the cantons. Here are just a few striking points from the position reference of the CCG from 2018: “If this proves necessary, in future bilateral sectoral agreements with the EU, at best, autonomous rules on state aid can be anchored, which reflect the federal structure of Switzerland and take the characteristics of the individual economic sectors into account. It must be kept in mind that the EU system is politically and constitutionally […] incompatible with the Swiss system. An adoption and dynamic further development of the EU regulations is therefore definitely ruled out.” (3.1. Point 11) And further: “Any monitoring and control of state aid granted in Switzerland can only be ensured by a Swiss authority within the framework of bilateral sectoral agreements.” (3.2. Point 16)10 [emphasis added mw]
  It is to be hoped that the cantonal governments will not fall short of this clear statement in the next hour of the decision. Even if, thanks to their intervention, the adoption of EU state aid law is not expressly included in the text of the framework agreement: Brussels would never, ever agree to the federal and cantons granting subsidies in the bilateral agreements based on it in accordance with Swiss law and the federal structure and for Switzerland itself to regulate and monitor. That would be diametrically opposed to the purpose of the framework agreement: It is supposed to force Switzerland to adopt EU law without any ifs or buts. 
  If it is clear to us citizens that the EU system is politically and constitutionally incompatible with the Swiss system, then the framework agreement has no chance in the referendum. Who knows, maybe neither in parliament.    •

¹ https://www.uvek.admin.ch/uvek/de/home/uvek/bundesnahe-betriebe/guter-service-public.html
² Gujer, Eric. «Die Schweiz ist ein Land der Selbstgerechten. Dabei ist die Liste der Affären und Skandale lang» (Switzerland is a country of the self-righteous. Yet the list of affairs and scandals is long.). In: Neue Zürcher Zeitung of 4 December 2020
³ DETEC [UVEK]. “Subventionsbezüge bei PostAuto Schweiz AG” (Subsidy payments at PostBus Switzerland Ltd.)
⁴ Gujer, Eric. “Die Schweiz ist ein Land der Selbstgerechten. Dabei ist die Liste der Affären und Skandale lang” (Switzerland is a country of the self-righteous. Yet the list of affairs and scandals is long.) In: Neue Zürcher Zeitung of 4 December 2020.
⁵ European Commission. Competition. Delivering for consumers. Government support for industry (state aid) (https://ec.europa.eu/competition/consumers/government_aid_en.html)
⁶ See “We should promote small hydropower instead of choking it off”; in: Current Concerns, 24 November 2020
⁷ «Swisscom-Privatisierung ist gescheitert» (Swisscom privatisation has failed.) Report from the debate of the Council of States. In: Neue Zürcher Zeitung of 8 June 2006.
⁸ «Ruedi Noser zieht Swisscom-Motion zurück» (Ruedi Noser withdraws Swisscom motion) In: Handelszeitung online of 26 September  2016 (sda/me)
⁹ Kowlasky, Marc. «Die Swisscom ist reif für die Privatisierung» (Swisscom ripe for privatisation). In: Bilanz of 31 May 2016
¹⁰ Conference of Cantonal Governments (CCG). Position Statement. State aid in the Switzerland-EU relationship. Plenary meeting of 23 March 2018