FEW WOULD argue with the terms and conditions set down for the possible disposal of a wide range of commercial State assets by the McCarthy report. But vested interests can be expected to resist vehemently his recommendations for improved oversight and restructuring of these companies, accelerated cost cutting and their likely sale. Because of economic history, important commercial considerations and diverging political views, progress is likely to be slow.
Mr McCarthy and his colleagues were asked by the last government to advise on how commercial State assets could be better deployed or disposed of, so as to support economic recovery. In response, they have identified “a planned and prudent approach designed to secure maximum value, to reduce the debt burden and to protect the public interest”. The report warns against rushed sales that could affect the value of the various assets. Such an approach, it says, would not be “prudent or even possible” given the need for revised regulatory procedures and complex legislation.
Whatever about the eventual sale of the companies reviewed, the need for changes to the regulatory system and to ministerial responsibility, so as to avoid conflicts of interest, is inescapable. A restructuring of the companies and a strengthening of oversight powers can, in themselves, be expected to enhance profitability and the competitiveness of the economy. On the other hand, the recommendations may delay Government plans to raise €2 billion from the sale of State assets. The amount of work required at legislative, administrative and oversight level to improve competitiveness, separate various components and maximise value for the exchequer is very large. In addition, the process could generate industrial unrest.
A degree of caution is evident in the recommendations, perhaps as a consequence of the cavalier manner in which Mr McCarthy’s earlier report on expenditure cuts was treated in 2009. The document puts the total value of all State companies at about €8 billion and estimates that €5 billion might be raised from the sale of commercially attractive assets. It draws attention to the manner in which government attempts to limit the pay of some chief executives was thwarted last year, questions the role of the boards that approved new remuneration packages and criticises the way in which capital spending accelerated during the economic downturn. It also suggests that general pay levels, particularly within the ESB, should be compared with British operatives.
The ESB received particular attention because it represents about half of the potential value available. The report recommended that high voltage networks along with hydro-electric stations, be transferred to EirGrid. All remaining elements of the company, including its foreign interests, should be sold. Similarly, only transmission assets at Bord Gáis should be retained. As for Bord na Móna and Coillte, the disposal of bogs and forests should not involve the sale of land. Over-borrowing by the State may have made asset disposal inevitable but, according to this report, sales are likely to be slow and difficult.