Whatever about the case-by-case merits of the Government’s announcement today to sell-off state assets, we should be clear: the EU-IMF Memorandum of Understanding does not require privatisation, in whole or in part. In addition, the discussion of the sale of state assets in the Memorandum does not take place in the fiscal section but rather in the section regarding obstacles to competitiveness. In other words, if there is to be a sale of state assets, the objective is not to write down debt but to improve competitiveness. Indeed, it is hardly likely that the Troika would demand that state assets be sold in order to reduce the projected debt of 115 percent in 2015 down to 114 percent (which is what the Government’s announcement today would do).
The quarterly reviews conducted by the Troika make it clear that the provision for selling state assets did not come from them – it came from the Government and its Programme for Government. And it was Fine Gael that was the driver of the privatisation provision in the Programme – Labour campaigned against privatisation in the last general election.
What we have had is an elaborate choreography around the issue of privatisation, shifting blame and inventing targets which have had the effect of obfuscating the issue. Nonetheless, this should not blind us to where the demand for privatisation is coming from. Senator Shane Ross, writing about the meeting between the Troika and the Technical Group of TDs, reported this exchange on the subject:
‘The troika delegates insisted that they had not prescribed any privatisations. They wanted to see certain semi-states “restructured” and competition in the market. Contrary to media perceptions, they were not pressing the Government to raise any specific amount from the sale of State assets. The figures in the public arena of between €2bn and €6bn did not come from them.’
That this is confirmed by Sinn Fein, from their meeting with the Troika, only reinforces this point.
The demand for privatisation – and the paying down of debt – does not come from the Troika. It comes from our own Government.
Below I reproduce the post I wrote back in October – which shows how we ended up with privatisation despite the fact that it is not mandated by the EU-IMF Memorandum of Understanding.
Privatisation is Being Driven by Fine Gael, Not the EU-IMF
The EU-IMF deal does not require the Government to privatise state assets. I’ll repeat that. The EU-IMF deal does not require the Government to privatise state assets. Those who claim otherwise have either not read the EU-IMF Memorandum of Understanding (MoU) and are just repeating what they heard from someone else. Or they are simply misleading people. It’s that simple.
Don’t believe me. Here is the MoU. Go to page 59 (paragraph 27). Here is what it says:
‘Building on the forthcoming report of the Review Group on State Assets & Liabilities the government will undertake an independent assessment of the electricity and gas sectors with a view to enhancing their efficiency. State authorities will consult with the Commission Services on the results of this assessment with a view to setting appropriate targets for the possible privatisation of state-owned assets.’
The MoU sets out a four-step process:
- First Step: Publish the report of the Review Group on State Assets & Liabilities. This has been done.
- Second Step: Undertake an Independent Assessment of the electricity and gas sectors (not done.
- Third Step: Consult with the EU Commission on the results of this assessment (not done.
- Fourth Step: Consider the possible privatisation of state-owned assets.
There are steps the Government must take before they even get to the stage of considering the ‘possible’ privatisation – steps they haven’t taken yet; namely, the independent assessment.
Now we can argue the toss all day but it is difficult to see how this section can be read as a ‘requirement to privatise’.
There’s another aspect to all this. What is the purpose of this process leading to the consideration of possible privatisation? To raise revenue to pay down debt? No. Absolutely not. The paragraph above appears under the heading ‘Raising the Growth Potential‘. In this section,the MoU is concerned with
‘. . . removing structural impediments to competitiveness and employment creation.’
It is not about raising revenue. If it was, it would have been placed in the preceding section on ‘Safeguarding Public Finances.’
Indeed, if anything, the Government is not in compliance with the MoU – as they have not yet completed an independent assessment of the electricity and gas sectors, never mind published one.
So, if there is no requirement to privatise public enterprises, if consideration of ‘possible’ privatisation must be about ‘efficiency’ rather than revenue-raising, then how have we ended up with quarterly reviews that refer to privatisation? Ask Fine Gael – for it is they who are driving this agenda.
In the first quarterly review, the reference to the sale of state assets has changed from ‘possible privatisation’ to:
‘Programme for Government and the Review Group on State Assets and Liabilities: The Government is due to consider a potential programme of asset disposals based on the Programme for Government and the Review Group on State Assets and Liabilities. The Government will discuss its plans with the European Commission, the IMF and the ECB when it has finalised its response to the Review.’
In the second quarterly review, the references to the sale of state assets went further:
‘Government will consider options for an ambitious programme of asset disposals, based on the Programme for Government and the report of the Review Group on State Assets and Liabilities.’
In both these references the Government will consider the sale of state assets ‘based on the Programme for Government’. In the first quarterly review, it is a ‘potential‘ programme; in the second, it is an ‘ambitious‘ programme. And who put these in? Michael Noonan and Patrick Honohan. It is part of the letter they wrote to the Troika. In the first quarterly review they state:
‘In the attached Memorandum of Economic and Financial Policies (MEFP), we set out our plans to further advance towards meeting the objectives laid out in our EU/IMF financial assistance programme.’
Not the EU-IMF plans – ‘our plans‘, the Government’s plans. That’s why the privatisation of state assets is based, not on EU-IMF requirements, but the Programme for Government. What does the Programme say?
‘We will target up to €2 billion in sales of non-strategic state assets drawing from the recommendations of the McCarthy Review Group on State Assets when available. Assets will only be sold when market conditions are right and when adequate regulatory structures have been established to protect consumer interests.’
It should be noted that there is no reference – either in the MoU or in the two subsequent reviews – to ‘non-strategic’ assets. The Government abandoned this concept that was in their own Programme.
Which party demanded that the ‘sales’ of non-strategic assets’ be inserted into the Programme for Government? Fine Gael. This is from their election manifesto:
‘We will sell non-strategic assets such as Bord Gais Energy, ESB Powergen, and ESB Customer Supply.’
Labour, on the other hand, was unequivocally opposed to privatisation:
‘Labour is committed to concept of public enterprise, and is determined to ensure that semi-state companies play a full role in the recovery of the Irish economy. Labour is opposed to short-termist privatisation of key state assets, such as Coillte or the energy networks.’
No doubt, in the negotiations in the Programme for Government, Labour felt it had to give way on this issue. But make no mistake – it is a Fine Gael issue. So where does that leave us?
- First, privatisation of state assets is not required by the EU-IMF deal.
- Second, it was inserted in the quarterly reviews by the Government, namely the Minister for Finance.
- Third, this issue is being driven by Fine Gael, not the EU, or the IMF or the ECB – or even by Labour.
Labour backbenchers, in particular, should take note. They, along with the rest of us are being driven into a policy that is mandated by Fine Gael and no one else.
Photo of Enda in the Dail yesterday defending the sale of state assets courtesy of Journal.ie