Dáil Éireann Debate, Wednesday - 19 October 2011
8 Deputy Charlie McConalogue asked the Minister for Communications, Energy and Natural Resources in view of a statement (details supplied) confirming to Dáil Éireann last week that the sale of strategic State assets was not a condition of the Memorandum of Understanding of December 2010, if he is in favour of the sale of State assets; and if he will make a statement on the matter. [30109/11]
View answer10 Deputy Richard Boyd Barrett asked the Minister for Communications, Energy and Natural Resources if he will explain his role in the discussions around the disposal of State assets under the EU-IMF programme and in relation to NewERA and proposals for a State investment programme to create jobs; and if he will make a statement on the matter. [30088/11]
View answer14 Deputy Derek Keating asked the Minister for Communications, Energy and Natural Resources if, in relation to the group set up on the sale of a stake in the ESB, the names of the members and its terms of reference. [29909/11]
View answerI propose to take Questions Nos. 8, 10 and 14 together.
The EU-IMF Programme of December 2010 involves a commitment that the Government will outline methods to raise funds through asset disposal. The 2011 budget included a similar commitment. The programme for Government includes a commitment to finance investment from the proceeds of the sale of certain non-strategic State assets.
Far from confirming to Dáil Éireann last week that the sale of strategic State assets was not a condition of the memorandum of understanding of December 2010, the Minister for Finance, Deputy Noonan, stated that the European authorities and IMF require the sale of State assets as part of the programme and confirmed that the Government supports the sale of non-strategic State assets.
Ireland is significantly dependent on the funding arrangements put in place under the EU-IMF deal to pay for its public services and restore the banking system. In this context, I accept that the fiscal path to which the Government is committed under the EU-IMF agreement demands that the option of realising value from State assets be fully explored. I accept that there is significant value in commercial State energy companies that could be realised at an appropriate time after necessary further analysis of all the complex factors relating to the disposal of commercial assets in the energy sector.
The memorandum of understanding between Ireland and the troika, as revised last April, commits the State, at the insistence of the troika, to an ambitious programme of asset disposal. In terms of value, this has inevitably led to a particular focus on the State energy companies, especially ESB Electric Ireland. In this context, the sale of a minority stake in the ESB as an integrated utility has been agreed by the Government. This decision is an early demonstration of the commitment by the Government to the programme for Government objectives and its obligations under the memorandum of understanding. The sale will be advanced by means of a defined process involving a full evaluation of the best approach to be taken, including consideration of the size of the minority stake to be sold. The process is being progressed by a group co-chaired by my Department and the Department of Public Expenditure and Reform and includes officials from the Department of Finance, the National Treasury Management Agency and NewERA.
I imagine that in his heart and soul the Minister is on the same track as me. It appears the ideologues in the Minister of State's party and the troika are pushing this along. Reading between the lines I suspect the Minster is trying to follow the principle of festina lente. While he has been forced to agree in principle, he will place a dris chosáin all along the way in the hope this will never happen because he and I know it is wrong. If that is his intention, he has my full support. Will he confirm that this is what he is trying to do?
He cannot say it in public.
If ever there was a booby trap set for a Minister, this is it.
It was set by the Minister.
If the Deputy does not mind, I will fail to spring it. The reason it is a case of festina lente is market circumstances are such that no one would wish to go to the market with State assets. The reason we are going to the market is the memorandum of understanding. The House has seen what has been enforced in Greece in the disposal of state assets. When one considers the menu of State assets in this country, as detailed in the Colm McCarthy report, one comes back to the energy sector. There are several other areas in which one could seek to realise a sale, but the proceeds would not make a great impact on our mountain of debt. Therefore, one comes back to the energy companies. The approach the Government has sanctioned is to seek a compatible investor at the right time, for example, something like a pension fund, to take a minority stake in a successful, vertically integrated utility in Ireland which is profitable, pays a dividend, is creating employment and a major player in securing our energy supply.
In the coming four years the turnover of the State will be in excess of €200 billion. The margin for error in that amount far exceeds the €2 billion referred to in the programme for Government to be raised through the sale of State assets. Therefore, like many other things, in financial terms, this aspect could be renegotiated. It is simply a drop in the ocean. So far this year the Government is €800 million ahead of the targets set in the budget. Will the Minister confirm that this process is being driven by an ideological view in the EU-IMF troika rather than by a financial need? If we achieve the targets set in the four year plan and the memorandum of understanding by growth, without selling assets, does the Minister believe the EU-IMF troika would agree that assets need not be sold? In that event, would the Minister be in favour of not selling them?
If we could achieve the targets set without the sale of State assets, the honest answer to the Deputy's question is that I would be perfectly pleased with that outcome. My approach to the disposal of State assets is that I am prepared to examine the issue on a case-by-case basis. Different arguments can be advanced for different holdings in State ownership and arguments that apply to one do not necessarily apply to all of them. This is one of the merits of the shareholder executive idea encompassed or proposed in the NTMA in the guise of NewERA. Individuals with the necessary expertise and the capacity to import expertise where needed will assess the totality of the menu in place on a whole-government basis.
Is the process being driven by an ideological view in the troika? It might be better if the Deputy were to put that question to some of his colleagues. I do not know what drove them to include it in November. I have watched the situation unfold in Greece and discussed it with my Greek counterpart. The view in Greece is that they could not possibly meet the imposition on them and that they do not have the amount of state assets required to realise the targets set for them by the troika. I am unsure whether it is ideological, but there is certainly a view within the troika that the entire purpose of this country being included in a programme such as ours is to encourage the recovery of the economy in order that we can seek market access again during the lifetime of the programme. The sooner we can go back to the markets to source our own funds to run the State the better. It seems taking a rigid, ideological position is not necessarily compatible with this objective.
The Minster has gone some way towards answering the question I intend to pose. To what extent does he believe he is in a straitjacket in dealing with this issue? To what extent is he in a bind in having to sell a stake in the ESB?
Several people representing the three elements that make up the troika visit this country at the end of each quarter and check the homework of the Department of Finance. If we are not in compliance, they will not sign the cheque. Up to now, they have accepted it. I hope my ministerial colleagues, Deputies Noonan and Howlin, will be able to report tomorrow that, once again, they have accepted that we have managed to meet the targets set.
We have exceeded them.
The Deputy has broken my train of thought. They require that we realise significant funds from the sale of State assets. It is an open secret that they attempted to include a figure of €5 billion in the renegotiated memorandum of understanding. Instead, the revised memorandum of understanding commits to an ambitious programme involving the disposal of State assets. I am unsure how "ambitious" it is, but I know the figure is more than the €2 billion committed to in the programme for Government. Perhaps the Deputy is correct to suggest that as time passes, a more liberal view will be taken of whether imposing a heavy demand on the State in terms of the disposal of State assets is consistent with economic recovery and restoring growth to the economy. The Deputy might be right in suggesting that as time passes, this aspect will be reviewed.
On the question posed by Deputy Keating, we are in a bind and must show product, so to speak. That is the reason we are in the circumstances we are in with the decision on the sale of a minority stake in the ESB.
I note the Minister is much more ideologically flexible than he was when he was gallivanting around the midlands a few decades ago. I am sure he will justify his flexibility on the basis that we are now in a different place. On the sale of State assets, is he in favour of selling off parts of Bord na Móna? What are his plans for the large tracts of semi and fully cut-away bog owned by Bord na Móna in the midlands?
I have regular discussions with Bord na Móna. The problem is we are running out of móna.
There is a fair amount of móna left down my way.
Yes, the company has been imaginative in diversifying and gradually replacing its core business. The Government is engaging with it in a number of areas. Obviously, the last thing we want to see is a diminution of employment in the company. The opposite is our objective and discussions with it are ongoing. I do not know what we will do with the cut-away bog. We are considering the matter. Much of this Question Time has been devoted to the issue of renewable energy, an area in which one could envisage a significant role for Bord na Móna. That is one possibility and there are others. The objective is to maintain and create employment.
The Minister has been very helpful and Deputies may have obtained a better reading of his mind this afternoon than on any previous occasion. He referred to Greece. Ireland and Greece are in a totally different position because we have adhered to the agreement we reached with the European Union and the International Monetary Fund. It is my understanding from the statements of the Government that the European Union and the IMF do not mind how the Government proceeds, provided it achieves the bottom line. However, when it comes to the sale of State assets, we appear to have common cause because the issue is being ideologically driven by the European Union and the IMF. We have seen what ideologically driven policies and competition in Europe did to the banking sector, for example. Will the Minister try to ensure the privatisation of State assets will be deferred for as long as possible in the hope we can avoid a forced sale of assets we do not want to sell? I am not opposed to selling assets where their sale would be better for everyone concerned. The Minister will agree, however, that the ESB or part of the company is not such an asset. Does he also agree that if one wants economic growth, control over basic energy infrastructure, that is, networks, is vital because one must be able to direct investment from a national perspective rather than on the basis of securing a return on capital? Does he agree that, if possible, the State should retain 100% ownership of the gas and electricity transmission and network systems?
As I have stated on a number of occasions, there is no question of the Government surrendering control of either of the companies to which the Deputy refers. The Deputy referred to adhering to targets, meeting the bottom line and substituting one thing with another. This trade-off is taking place on the revenue side, for example, in reversing the previous Government's decision on the minimum wage, we had to modernise the joint labour committees. However, the troika has not at any stage indicated an intention to let us off the hook on the commitment to dispose of State assets set out in the original memorandum of understanding.
While I sincerely hope the quantum is open to negotiation, the divvy-up between what we put into an envelope to send to Frankfurt and what we can use for reinvestment purposes for job creation in the indigenous economy is as important. I hope this matter will also be up for negotiation. I know the Minister for Public Expenditure and Reform, Deputy Howlin, and the Minister for Finance, Deputy Noonan, have been engaged in that very process. As Deputy Ó Cuív stated, this may well be a dynamic that unfolds over a period. I have already given him a fairly frank answer to the original question he asked. However, the ideology, if that is what the Deputy calls it, that drives troika thinking appears to be, as in the case of Greece, that if it is to fund a programme of support for the administration of the State, it expects us to make a contribution in the form of the disposal of some State assets. I hope the quantum, as well as the destination of the proceeds, is negotiable but, as far as I am aware — we will hear what the two relevant Ministers have to say tomorrow — there is no sign that the troika has relented on the principle of the State making a contribution through the disposal of some State assets. While I wish it were not so, that is the position.
Does the Minister understand what is driving the process? It is being done in the interests of private companies and financiers which want to get their hands on assets the Irish people have built up. If that is the case, we will work with the Minister to ensure they do not succeed. We will support him and I hope he will support our efforts.
Written Answers follow Adjournment.
