Evidence shows sale of key state assets will cost us vastly more

THE McCarthy Report on State Assets and Liabilities is short-sighted, contradictory and seems to have little regard for the state’s strategic position in fostering future economic development in Ireland.

Its logic on the sale of parts of the ESB and Bord Gáis, the two most valuable companies, is perplexing to say the least. It says that the ESB distribution business, its power generating assets and its international businesses should be sold off right away but that the transmission facilities should be kept in public ownership.

Energy and electricity are getting more expensive. The Government can keep energy prices down to make businesses more competitive to generate employment, once they are kept in public ownership. After all, the state does not have to add on a margin to make a profit.

Phoenix Energy in the North, a private electricity provider, has just upped its prices by 39% and there is nothing that anyone can do about it.

This is strategically important to the cost base of Irish industry. But how can the state do this if the networks and power generating facilities are in private hands? It can’t.

Opportune private owners will look for “compensation” from the state and would refuse to yield. Selling everything except the transmission facilities is worse than owning a car without an engine.

The report also recommends selling all or many of the ports in Ireland.

The Government has, through public-private partnerships, delivered huge profits for toll road operators nationwide. Imagine what it could cost businesses that import and export if they had to pay private operators for the use of ports in the same way.

The report advocates the sale of Coillte and its assets but keeping the land in state ownership. The assets would include all the trees and land that is not under forestry.

This means that a private company could buy the assets, process all the trees and leave the land barren. The rural tourism amenity of Coillte forest parks would then cease to exist. Imagine the effect on quality of life of Irish citizens and the damage to the tourist industry.

Similarly, the report recommends selling most all Dublin Bus routes, expressway services and many other national routes. The dangers here are obvious. Only the most lucrative routes would be maintained or properly serviced.

Anybody living in areas where there isn’t significant demand for buses could end up having no bus service at all.

Fundamentally, it is worrying that one man, Colm McCarthy, who has always been called in simply to slash and burn, is given the power to make strategic recommendations, with scant concern for economic evidence. The evidence is not supportive of his stance.

A report by Forfás raises serious doubts about improved performance of state- owned companies once they become privatised.

It found that the sale of Eircom and Greencore have resulted in poorer levels of company performance in the wake of privatisation.

Once privatised in 1999, Eircell, the mobile phone operation within Eircom, was sold to Vodafone who have reaped substantial profits since then. Indeed for many years afterwards, Vodafone Ireland was the most profitable company in the Vodafone empire. What is interesting here is that Eircom’s performance had been improving substantially prior to the 1999 privatisation which suggests that the new owners of Eircell reaped these rewards.

This in turn suggests that it would have been more profitable for the Irish state to have held onto this asset.

The performance of the fixed-line business of Eircom even further highlights how it would have been more economically beneficial for the state to keep ownership: its share price collapsed after privatisation and thousands of Irish people were burned.

Throughout the 2000s, the new owners, invested little in the capital infrastructure of the company resulting in a failure to roll out high-speed broadband nationally.

This has had a negative effect on the competitiveness of many Irish companies. Since then the Irish state has had to re-enter the market itself and invest in the rolling out of modern broadband infrastructure.

Decisions on the spur of the moment have been made by the last government on the banks which were disastrous. There is an inherent danger that this may be happening now also and Irish society may well suffer in the years to come.

- Dr Tom O’Connor is a lecturer in economics and social policy/social care in the Department of Social Studies at Cork Institute of Technology.

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