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Sale of State Assets

Dáil Éireann Debate, Wednesday - 13 June 2012

Wednesday, 13 June 2012

Ceisteanna (11)

Mick Wallace

Ceist:

10Deputy Mick Wallace asked the Minister for Public Expenditure and Reform in view of his proposal to use funds realised from the sale of State assets for job creation, his views on European research which shows that privatisation has a largely negative effect on employment and working conditions; and if he will make a statement on the matter. [26482/12]

Amharc ar fhreagra

Freagraí ó Béal (5 píosaí cainte) (Ceist ar Minister for Public)

Although I am unaware of the particular research to which the Deputy's question refers, and he might indicate what it is as I could not find it, I would not necessarily accept that such findings can be extrapolated either generally or to the particular context of the programme of State asset disposals I announced last February.

In dealing with the troika it has been the Government's consistent position that funds released from asset disposals should be used to support job creating initiatives in the economy. After long-term negotiations, I recently reached agreement with troika representatives that all such proceeds would be available, in one shape or another, for this purpose. Half of the proceeds will be available to fund employment enhancing projects of a commercial nature. The other half, while destined eventually to pay down debt, will, in the first instance, be constituted as a fund to guarantee additional lending into Ireland, for example by the European Investment Bank, in support of further investment in job-creating initiatives.

Apart from the receipts from the sale of assets which the Government will retain for reinvestment, the sale of certain business units of State companies may also offer the prospect of access to significant new capital to grow these businesses, which might not have otherwise have been available given the current position in capital markets. The Bord Gáis Energy sale and the proposed divestment of some of the ESB's non-strategic power generation assets also present an opportunity to achieve wider economic benefits by introducing new players into the Irish energy market thereby leading to increased competition, which should, hopefully, increase efficiency, drive down costs and lead to reduced prices for consumers.

Last April's announcement of the establishment of the new Irish water utility under the umbrella of Bord Gáis Éireann amply demonstrates the Government's continued confidence in the semi-State sector as both a vehicle for large-scale infrastructural investment and a driver of innovative change, and we will continue to ensure the State sector plays a vital part in the generation of jobs.

The research to which I referred in the question was an EU funded project entitled Privatisation of Public Services and the Impact on Quality, Employment and Productivity. It examined the impact of privatisation and liberalisation of public services in five European countries, namely, Austria, Belgium, Germany, Sweden and the UK. Case studies across six different sectors found that following liberalisation and privatisation the main company objective, that is the reduction of production costs, was achieved primarily at the cost of workers mainly through the worsening of working conditions. The report states, "The balance of evidence suggests that liberalisation and privatisation have been primarily associated with employment reductions rather than with employment creation and that, at the same time, employment within the target sectors has become increasingly part-time, often having greater recourse than when they were publicly delivered services to self-employed, and perhaps also temporary, workers".

The project concurs with many others in its findings that positive effects and better performance are mostly the result of superior regulation rather than of competition or private corporate initiative. Liberalisation and privatisation of public services have largely negative effects on employment and working conditions and varied effects on productivity and service quality. I am not sure whether the Government has conducted a cost benefit analysis on how this will work out. Will it really create extra quality jobs?

If I cannot find the report he mentioned I will get my office to contact the Deputy to ensure the review group takes full account of it. The experience of privatisation is not uniform and it depends on what is privatised and the method used. Our experience in the State of the privatisation of Telecom Éireann was disastrous in my judgment. It was a wholly wrong decision to privatise a strategic company like that, which is why we will not go down this road. What we have put on the table to meet the troika requirement is the energy division of a State company. We already have a very elaborate company, namely, the ESB, in electricity generation. Do we need two State companies competing with one another or would it be better to have a dynamic private sector company competing with a State company and let the State company match it? Earlier we debated the fairly ludicrous situation we had in the past where we had two State companies in the energy sector, one of which was required by instruction from the Minister with responsibility for energy not to reduce its prices so the other State company could get a bigger market share. This was supposed to amount to competition but this is nonsense.

There are specific instances of privatisation being very successful and the Deputy will know the example of Great Island power station very well as it is not far from his home base. Endesa, a private company, has bought a mothball power station and is bringing national gas into the county, which is very important. It is investing heavily in bringing the power station back onstream.

I agree with the Minister with regard to the Great Island power station. However, I disagree with the notion that we should sell assets because the troika thinks we should do so. This is not healthy and it will not create jobs in the long term. The Great Island power station was lying idle and selling it to someone prepared to get involved at a commercial level was a good idea.

I agree with the Deputy.

Written Answers follow Adjournment.

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