THE HISTORY of the privatisation of State companies reveals a very mixed record of success. Since 1991, when the Irish Sugar Company was sold, and became Greencore, €8.2 billion has been raised for the exchequer by the sale of ten State-owned enterprises. Most of that revenue – €6.3 billion – was collected in 1999 when Telecom Éireann, renamed eircom, was privatised.
Last year the review group chaired by economist Colm McCarthy recommended a planned programme of disposals. It estimated that up to €5 billion could be raised in this process. Yesterday the Government adopted a less ambitious and slightly different approach. One that does not, as Ictu general secretary David Begg has acknowledged, involve a wholesale sell-off of State assets.
The Government aims to raise €3 billion from its modest privatisation programme, with €2 billion used to pay down debt and €1 billion used to invest in the economy as a means of boosting employment. The agreement to split the privatisation receipts was reached after some lengthy negotiations between the Government, and the troika of lenders – the European Union, the International Monetary Fund and the European Central Bank – that oversee Ireland’s bailout programme. In contrast, the McCarthy review group favoured using all the proceeds to reduce the high level of State debt. Much will depend on how Government deploys the privatisation receipts in its efforts to boost growth, improve competitiveness and increase employment. However, the scale of Ireland’s enormous and rising debt burden – €119 billion – presents a huge challenge: a €2 billion debt reduction is less than 2 per cent of the current national debt.
How much the Government hopes to raise from the sale of State assets is, given the circumstances, much clearer than what will be sold, when, and at what price. The Government may sell its stake in Aer Lingus and some of the forestry assets of Coillte, though not its land. Both still require further consideration and, in the case of Aer Lingus, some further improvement in market conditions before any sale can be considered. Minister for Public Expenditure Brendan Howlin yesterday offered the public reassurance about the Government’s proposals, insisting there would not be a fire sale, or a quick disposal, of State assets. “Nothing,” he said, “will be sold unless it presents good value, fair value for the taxpayer.”
The Government, which had decided to sell off part of the ESB, changed its mind, citing regulatory, legal and practical difficulties as the reasons. Nevertheless, some of the company’s power generation capacity will be sold. That, and the sale of Bord Gáis’s energy business, will provide most of the €3 billion in privatisation receipts that the Government hopes to raise over the next two years. But the sale of Bord Gáis Energy will not just raise revenue for the State, it should also benefit consumers by providing greater competition on price in a sector that, up to now, has seen far too little competition between energy providers.