Matt Burgess writes:
The government has introduced legislation which will allow the Minister of Health and the Director General to take over private companies doing COVID testing (further description is here). The likely target of this change is Rako, which has sought a commercial negotiation with the government for the last year. The amendment, which is before the Select Committee, will give the government the option of taking Rako’s property and unilaterally determine compensation.
This is potentially the most spiteful and malicious action by the Government.
Rako has spent around a year trying to convince the Government of the merits of saliva testing. After months of delay they finally agreed we should use it. But then they did a tender and gave the tender to a company that didn’t have a validated test. I suspect they did this, because Rako had so embarrassed them by not keeping quiet, but going public over how the Government should have been using saliva testing. The bottom line is a year later and the Government has yet to roll it out in a meaningful way.
So having made huge blunders in terms of not agreeing to it, and a flawed tender process, the Government is now sneaking a law change through Parliament under urgency that would allow them to simply confiscate the labs off Rako and unilaterally determine what the compensation will be. This is third world stuff.
Burgess also looks at the regulatory impact statement on the proposed law change and notes:
Focus on costs. Officials seem to operating with a cost model that threatening to take a company’s IP is costless, and costs crystalise only when property is actually taken.
I wonder what Rako’s investors and employees think about that view? In fact, I wonder what every owner of intellectual property in every sector thinks about the Ministry’s view.
Because the cost of taking companies’ property is not the administrative overhead, as officials suggest in the RIS.
The cost is all the investment in innovation that will not happen in the future.
Those costs are large, big enough to be measured in percentages of GDP. So it is laughable that officials could list administrative costs as the only real downside of their proposal.
Do officials at the Ministry of Health understand how investment in specific assets works? Do they understand that investment in intellectual property, and in all sunk assets, depends on the credibility of the government’s promise not to take the property once it is created? Do officials recognise that even threatening such opportunism in one sector could have wider ramifications about security of property elsewhere? That prospective investors in wind turbines or EV charging infrastructure won’t notice the government putting in place machinery to take the property of medical companies?
Could officials and the government be any more short-sighted?
Basically the Ministry of Health doesn’t think confiscating private labs has any costs to society or the economy except administrative ones.