Unprofitable public firms' funds reviewed

New ways will have to be found to finance the non-commercial services currently provided by semi-state companies, the Minister for Public Enterprise, Mrs O'Rourke has said.

She said, citing examples, that certain public transport and postal services which are not profitable will have to be funded in new ways. "There are two broad options, they can be funded by all companies operating in a sector or directly by the State," she said.

"In effect that means these obligations will be paid for either by the customers or the taxpayers," she added. She was speaking at a SIPTU conference on Public Enterprise, Privatisation and Strategic Alliances.

She said that while governments have long required the provision of "certain defined levels of service which a commercial operator would not choose to provide, we now have to rethink how to implement these public service obligations in more competitive markets".

She said companies like CIE and An Post which have offset losses by cross-subsidising from the profitable parts of their business will no longer be able to do this, with new levels of competition and competition rules. "Commercial activities will be ring-fenced," she said.

"In some areas public service obligation payments have traditionally been made to a single dominant operator," she stated.

"This may also change in the future as a result of EU legislative action, based on the well established principle of competitive public procurement by the State," she added.

On the subject of future of the semi-State companies, Mrs O'Rourke said that she did not believe in selling them off "in one fell swoop". She said that instead the Government would look at each company "case by case", and had several options to choose from - strategic alliances, employee share ownership, public share offerings, disposal and public/private partnership.

She said the Government has learned from the experience in Britain where the level of service did not improve when State companies were privatised and "fat cats just got fatter". "The key to a successful approach is to look at the requirements of each individual company and to devise a model which suits the requirements of that company," she said.

Meanwhile, the vice-president of SIPTU, Mr Des Geraghty has called for the setting up of an agency to oversee and assist in the development of employee share option schemes in both the private and public sector. He said such an agency would provide advice to employees on share option schemes and could be used as a way to stop "speculative share dealings or predatory take-over bids". The agency might do this by ensuring employee shares stay in the hands of workers.