McCarthy report - Fire sale will not fix our problems

FOR the Government to rush headlong into selling the ‘family silver’ at this difficult juncture in Ireland’s economic history would be sheer madness.

Tempting though we may find the underlying thrust of the McCarthy report on state assets and liabilities, it would be folly to embark on a fire sale of what remains of the nation’s wealth in a bid to reduce the country’s high level of indebtedness.

Colm McCarthy is not recommending a fire sale as such but he has effectively put an up-for-sale sign over the country. Politically, the hard sell approach is softened by the recommendation that key companies such as ESB and Bord Gáis not be sold off immediately but restructured and their regulatory framework strengthened. In principle this is a good idea and would go some way towards enhancing the competitiveness of the economy if assets were not sold.

But while keeping the strategic grid and transmission assets of the electricity and gas industry in public ownership, virtually everything else is up for grabs. With global energy supplies in turmoil, the inherent danger of relinquishing sovereign control over such assets is self-evident.

If assets were to be sold, value for money is paramount. There is no way in the current climate that Ireland could expect to recoup anything remotely approaching the €5 billion price tag placed on the menu of companies earmarked for sale by McCarthy. They range from buses to air and sea ports, Aer Lingus shares, aspects of ESB and Bord Gáis, the country’s forests and peat production, elements of the tourism industry, plus state involvement in the horse and greyhound racing.

The lesson of the disastrous Eircom privatisation and the damning Moriarty Report on the mobile phone licence sale to businessman Denis O’Brien, is the fundamental need for the utmost caution in considering proposals to sell off state assets. Government assurances against rushing its fences are to be welcomed.

Rather than make instant decisions calculated to turn budding entrepreneurs into billionaires overnight, it should consider arguments against a speedy disposal of successful state companies. While sales would benefit the Exchequer coffers, broad social, strategic and employment issues are also vitally important. As the banks have demonstrated, the privatisation route is no guarantee that things will be run better.

The central question posed by McCarthy is whether the state could realise more value by selling assets than by owning them. To date, Ireland’s track record in grappling with this question has not been encouraging. With the benefit of hindsight, it could be argued that greater value could have been attained for the taxpayer and the national communications structure significantly strengthened if Eircom had been maintained by the state under licence and its operations outsourced.

In coming to terms with the harsh economic realities of our times, it may make sense to sell certain assets. But it is simplistic to think that Ireland’s economic difficulties can be resolved by flogging the family silver and throwing the proverbial baby out with the bath water.