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Sale of State Assets

Dáil Éireann Debate, Wednesday - 13 June 2012

Wednesday, 13 June 2012

Questions (4, 5)

Sean Fleming

Question:

4Deputy Sean Fleming asked the Minister for Public Expenditure and Reform if he will exclude Bord Gáis from the list of State assets to be sold in order to protect the parent company of Irish Water from the privatisation process; and if he will make a statement on the matter. [28657/12]

View answer

Oral answers (10 contributions)

I wish to clarify for the Deputy that the Government has no intention of disposing of Bord Gáis Éireann. The State asset disposal programme that I announced last February refers only to Bord Gáis Éireann's energy generation and supply business. I made it clear at the time that the rest of the group, which consists of the gas transmission and distribution systems and the two gas interconnectors, will remain in State ownership.

In deciding that the new Irish Water utility will be an independent State-owned subsidiary of the group, the Government's intention was that a number of key synergies would be achieved between the gas and the water utilities core network functions, such as operating in a regulated environment, network management, metering and utility operation systems. These core functions will not be impacted by the sale of Bord Gáis Energy, which is a separate business within the group and which operates under a separate management team. I do not, therefore, propose to exclude Bord Gáis Energy from the disposal programme.

I disagree with the Minister's perspective on this issue. I accept it is not the Minister's intention to privatise Bord Gáis completely and that he proposes to give it a new business through a subsidiary which it will own and control. This subsidiary, Irish Water, will be responsible for the supply of water and sewerage services throughout the country. The people of Ireland will not be happy and difficulties with non-payment will ensue if they believe he is giving control of their water to a company which is being partially privatised. They will be afraid that he may plan to sell off Irish Water.

I will attempt to allay the Deputy's fears. It is the Government's firm intention to establish a publicly-owned water utility called Irish Water. It will be retained in State ownership. That will be enshrined in legislation and, while we have no control over future Governments, as long as my party is a member of this Government no consideration will be given to the sale of Irish Water. That is the unanimous decision of both parties in Government and it is our firm commitment.

Bord Gáis Éireann was established to distribute natural gas. It built up other business but these are not related to its core functions. Selling off some of the company's capacity to generate electricity in order to increase competition in the market and avoid domination by two publicly owned utilities is a pro-energy and pro-business stance which the Deputy opposite would normally be inclined to support.

On the sale of State assets, I judge each case on its merits. I do not have a philosophical objection, nor am I am supporter of a philosophy on it. The Minister is saying he is selling key State assets that are not part of the core of Bord Gáis. Irish Water is not part of the core of Bord Gáis and people feel it will fall into the same category. I accept the Minister means what he says but it accounts for nothing in the real world. The view that the Minister would not like to see something happen is not a legal commitment.

Perhaps the Deputy did not hear. We are writing it into the law of the land so it is a legal commitment. Every Parliament is sovereign so we have no control over what a future Parliament will do. As far as this Parliament and this Government is concerned, the utility will be a wholly-owned State utility. Most parties in the House and most Independents see it as the correct course. I do not see any push to have it privatised because the experience of privatised water in the UK is not good.

I am not enthusiastic about the general principle of selling State assets. We made a decision about what we are putting on the market. These are not strategic assets and will allow the leveraging of money to invest in new jobs. In Irish Water, we are creating the biggest new State utility since the ESB.

Joe Higgins

Question:

5Deputy Joe Higgins asked the Minister for Public Expenditure and Reform the stage at which his privatisation programme is currently at and taking into account the job losses that arose from the previous privatisation and part privatisation of State assets, if he has undertaken an impact assessment study of the likely job losses that will arise from the sale of State assets; and if he has conducted a study of the way such losses would compare with jobs alleged to be created with the proceeds. [28689/12]

View answer

I am pleased to report that the State asset disposal programme has made significant progress since I announced its content last February. The respective inter-departmental steering groups established at that time to prepare the assets for disposal have examined comprehensive financial reports by NewERA on Bord Gáis Energy, BGE, and Coillte and work is also proceeding on identifying the electricity generation assets of ESB to be included in the sale programme.

Under the EU-ECB-IMF funding programme, the Government remains committed to outlining in detail for the troika, by the end of this month, the specific regulatory, legislative, corporate governance and financial reforms that need to be taken in 2012 to allow for the State asset disposal programme to proceed in 2013. A calendar with indicative timelines for sales will be set out. The issues requiring resolution having already been identified by the end of the first quarter and we published that in the report of the last troika visit. Work is continuing now in the relevant Departments and agencies on considering how they should be addressed in order to facilitate the launch of sale transactions in 2013.

With regard to the second part of the Deputy's question on job losses, the inter-departmental steering groups mentioned earlier are charged, inter alia, with identifying any implications for employment that arise from the asset sales in question. I do not necessarily accept the implication in the Deputy’s question that job losses will be inevitable. Part of the receipts from the sale of assets will be retained for reinvestment. The sale of certain business units of State companies may offer the prospect of access to significant new capital to grow these businesses, which might not otherwise be available given the current position in capital markets. The BGE sale and the proposed divestment of some of the ESB’s non-strategic power generation assets also presents an opportunity to achieve wider economic benefits by introducing new players into the Irish market, thereby leading to increased competition, which should, hopefully, increase efficiency, drive down costs and lead to reduced prices to consumers and businesses.

Any progress on the privatisation of State-owned assets, meaning assets owned by the people, is not something to be pleased about. I ask the Minister to recognise the serious implications for the protection of jobs in the privatisation process. In an appalling development in 2009, 1,300 high-quality aircraft engine maintenance jobs were lost mainly at Dublin Airport when a multinational company, SR Technics, closed down peremptorily. Does the Minister accept this happened because of the privatisation of Team Aer Lingus? Does he recognise that vulture capitalists will move in to take ready-made assets when they are only interested in private profit, not the jobs and security of employment of Irish people? It is repulsive to a majority of people in this country that the troika, representing the interests of the financial markets and bondholders, dictates to this State - and that the dictation is acceded to by the Government - that public assets are sold off in this way rather than developed and invested in to create tens of thousands of jobs.

Is the report in The Irish Times today, that the troika is demanding Aer Lingus to be totally privatised at the beginning of next year, accurate?

For many years, I have known Deputy Higgins's view on State industry and private industry. He regards one as all good and the other as all bad. I do not have the same philosophical view and I believe there is room for a dynamic State sector, which we need to protect and enhance, but not everything in the State sector is, by definition, good. Neither is everything in the private sector, by definition, bad. I will provide Deputy Higgins with a concrete example from my constituency. The State-owned company, ESB, sold Great Island power station to a private company called Endesa. From being a mothballed generating station owned by the State, it is now a facility in which the company invested €300 million and it is bringing natural gas to my county for the first time. It has the potential to create many jobs. We want to be smart in terms of utilising resources and looking to the next generation of State companies, including Irish Water, to generate jobs and provide the infrastructure for further jobs. The sale of BGE grew up from a company designed to distribute gas and built up a generating capacity from wind farms to gas power generating stations.

To sell off the generating element of the company and create real competition with a State company will test the mettle of the ESB. It is well fit for purpose and it will be good for the business and private consumers.

Does the Minister not realise preparation for the privatisation of the electricity generation has been going on for years? So-called competition has been a farcical joke, with the price of electricity increased by the regulator so that venture capitalists are tempted into the market by increased profits to create competition. What kind of a joke of a way is that to carry on?

The Minister did not answer me with regard to Aer Lingus. Is the troika pressing for its privatisation?

The Minister has not carried out an impact study comparing what jobs could be lost, as in many privatised industries, and the damage done. The Telecom Éireann privatisation did major damage to investment potential in this country as venture capitalists asset stripped for private profit. What percentage of funds will the troika allow to be invested if the Government sells it off? I will oppose it at every hand's turn.

I agree with much of what the Deputy said. I fundamentally disagree with the way Eircom was privatised. It was a strategic company providing a strategic service. That is why we are not selling off any of the strategic distribution lines of gas or electricity in this country. We are determined not to make those awful mistakes. I also agree with the point of Deputy Higgins in respect of artificial competition. The notion that energy competition is one State company being forced to keep high prices while another State company takes its business is a nonsense. I agree with Deputy Higgins and that is why we need real competition, with a State company unleashed to compete in a real market with, hopefully, an external player that will drive down the cost of energy for all consumers. That is what we want to achieve, without being captured by any ideology of the past.

There is no pressure on us on the sale deadline for Aer Lingus. We will only sell State assets if there is a fair market price. This is also true of BGE. If circumstances are not opportune when we get to the market, that will be my recommendation.

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