Brendan Keenan: Selling state assets is not just about raising revenue
ONE of the striking things about the Government's approach to the bailout arrangements is how little it has tried to take ownership of the process.
At best, ministers introduce Tina (There Is No Alternative); saying all these decisions are most unfortunate but the money just has to be saved. As often as not, they simply blame it on the troika and say they had no choice.
Time will tell whether this is the right political strategy. It certainly adds to the feeling of unfairness and persecution and the growing hostility to Europe.
But it is possible to make the case that many of these controversial actions have merit in their own right and that the Government would be inclined to take them even if there was no bailout.
This is certainly the case when it comes to state companies. Long before the crash, there were regular complaints about the cost and quality of their products and services and calls for more competition and privatisation.
There are valid arguments against privatisation, whether specific or general, and lots of bad examples both at home and abroad.
The Government seems to have got itself in the awkward position of supporting the arguments against selling state companies, while doing the deed anyway.
On yesterday's evidence, so has everyone else. Not a single rejoicing voice could be heard. Instead, there was a general air of sadness that the State would no longer generate as much electricity as it used to or try to get people to install gas central heating.
There was also quite a consensus that using the money to reduce the country's €200bn debt, by however small an amount, would be a bad idea.
The beastly troika was insisting that €2bn be used for this purpose, went the line but, with a herculean effort, the Government had wrested €1bn to support job creation.
This begs the question as to whether Government job creation can match the savings of €60m a year interest which, post bailout, Ireland can expect to pay on €1bn.
Even the employers' body IBEC found itself on the slippery slope of talking about using some of the €1bn for "investment in skills and education". A good idea maybe, but it is really current spending.
That distinction between debt and deficit lies at the root of the demand for asset disposal. Ask AIB and Bank of Ireland. They were obliged to sell some of their best operations (precisely because they were the best) to reduce debt.
Creditors do not see why they should lend to debtors who have money tied up in assets. The bank sales amounted to five times the €3bn that the Government is planning to raise. In this year's Budget alone, changes in state assets added €2bn to the national debt.
The amount involved is so small that the troika appears to be simply affirming the principle which applies in most bailouts -- and most assuredly in Greece and Portugal.
But the troika seems also to have decided not to make the best case it could. There is good reason to think that this is about more than the €3bn.
Privately, the outside lenders are often at one with critics in Ireland who perceive a cosy relationship between Government and state companies, which they see as allowing excessive costs and the stifling of competition.
As it happens, one of the most controversial cases surfaced yesterday. This is what to do about the gas interconnector with Scotland. Not even the cabinet of the time thought this was needed, but signed it off at the last minute under pressure from Bord Gais.
Ironically, the building of the pipeline was seen as adding to the value of Bord Gais in any future privatisation.
Yesterday, the energy regulator published a draft decision on the price of gas through the interconnector.
"Essentially, they propose to perpetually reward Bord Gais for what increasingly looks like a bad investment decision in the past," was the verdict of resource economist Richard Tol, who recently left the ESRI.
HOWEVER, the troika is not inclined to push the case for "structural reform" publicly. Again, one can see why. It is a hot domestic political issue which could get a lot hotter.
Within minutes of Brendan Howlin's announcement, the ESB unions were warning of a ballot on industrial action. Serious cost-curbing regulation or competition would mean fewer jobs, less pay or both.
The McCarthy report dealt as much with change as with privatisation. It wanted pay comparisons with similar companies in other EU states. It suggested that the energy regulator choose which ESB power stations should be sold.
It wanted a review of regulatory law, which often obliges the regulator to allow state companies recover their costs from customers, however dubious those costs might be.
The troika may well push for changes along these lines, in return for the €1bn concession, but not too loudly.
Like the Government, it knows that trouble from the trade unions could undo much of the progress made in presenting Ireland as a country on the road to solvency. Which is why, after all the hoopla, the sales may not even happen, at least not in the immediate political future.
There seems to be an agreement with the troika that there will be no sale until the price is right. With Bord Gais Energy -- perhaps the shiniest piece of family silver -- reporting losses of €10m and setting aside €25m for unpaid bills, one could wait a long time for the prices which might have been obtained six years ago.
Not that price is everything. The State sold Telecom at the very top of the telecommunications bubble. It was brilliant investment timing, but much good it did in the end.
Irish Independent
