reprinted from: Australian Financial Review
Security cost: user pays is the way to go
By Anthony Bergin The Tourism Task Force managing director, Chris Brown, described last week's decision to make industry pay for new airline baggage screening costs as the government "outsourcing its national security responsibility'. The costs are expected to be passed on to travellers. Virgin chief executive, Brett Godfrey argued that "security is the government's responsibility", not an aviation issue. He questioned whether the government would now start looking at taxes for nightclubs, shopping malls and football games. Who pays for anti-terrorism measures is now shaping up as a key economic and political issue. Should it be federal, state or local governments, the private sector or individual stakeholders? Generally speaking, the principle that has been adopted is that the users, providers and owners of the property or service pay for the costs of security. This is a sound approach. Those who fly pay for aviation security, those who live in a high-rise apartment block or own it pay for security at that building, and those who holiday on a cruise ship pay for on-board security. Once governments start subsidising anti-terrorist measures money will be wasted. Some firms will take unnecessary and expensive security measures. There will be intense lobbying to gain government anti-terrorism funding support. At a time when the federal budget is under pressure from the costs associated with the war on terrorism since September 11, the Howard government has committed $1.3billion over five years to strengthen counter-terrorism arrangements the public should not be subsidising private sector protective measures. Costs should be borne by the users of the service in order to reduce overall costs. This will provide an incentive for companies to innovate in their anti-terrorism protection. Some industry leaders argue that industry can take care of its own security, as it has a powerful incentive to make sure it's safe. Government has no real role here. Leave it to market forces. But that approach will not offer adequate protection for the whole Australian community. The public should expect that government will set minimum standards and regulations in areas such as codes for skyscrapers and food safety, where there may be terrorist threats. Certain threats such as biological attacks require a response with specialist equipment, which would be difficult to achieve without direct government intervention. Similarly, there is almost no traditional terrorism risk insurance available for commercial properties and infrastructure in Australia. Lack of adequate information to price the risks associated with terrorism has resulted in a market failure. The government has now intervened. An Australian Reinsurance Pool Corporation will be established to provide reinsurance cover for losses arising from a declared terrorist incident. The Treasurer has stated that the reinsurance scheme would wind down once appropriate commercial cover was available. This is sensible. As a general rule, the government should fund only those anti-terrorist activities that are not supplied, or are inadequately supplied, in the market. NOTE: Anthony Bergin Is Director Australian
Defence Studies Centre, University College, Adf Academy. |