Wednesday 30 May 2012
Has the State any Business in Business?
Sinéad Pentony: TASC held its first lunchtime seminar yesterday. Paul Sweeney considered the question - ‘Has the State any business in business?’. Paul’s presentation put the issue of privatisation in the current context; identified the winners and losers in privatisation; and how/where it fits into industrial policy. The presentation draws a number of conclusions including the need for a more nuanced approach – privatisation is not a black and white issue; and there is a need for more diversity in the forms of ownership, as set out in the recent report by The Ownership Commission, which was chaired by Will Hutton.
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4 comments:
Where to start? Why not a positive? At least there's a recognition that the State had not invested directly in the semi-states in the past. But there's no recognition of where investment financing came from. Yes, there were borrowings, but most had statutory constraints on borrowing and, even as these were relieved, they were both reluctant to expand, and constrained from expanding borrowing, due to credit rating and debt service cover constraints. So where did the additional investment financing come from? Why, from final consumers of course, who count for very litlle in the ICTU's producers' paradise. In the normal course of events consumer's revenue covers opex, the annual depreciation charge and the return on capital. But for the last 15 years consumers have provided, on top of these, a large percentage of investment financing up-front. And then they paid the full return and depreciation charge on the assets they had financed up-front. It's a great business to be in - and the ESB and BGE have taken full advantage of thier captive customers' largesse investing with gay abandon in activities outside of the state, e.g.:
http://www.irishtimes.com/newspaper/breaking/2012/0420/breaking38.html
The Irish banks failed because of a total failure of Irish bank supervision and financial regulation. But the same style of 'world class' regulation continues to be applied to the utility sectors. No wonder consumers are being hosed.
What is now being proposed by the Government - which as indicated had its origins in a 2005 ICTU proposal - will do nothing to address this massive rip-off (and will probably make it worse).
I could go on, but the diingenuousness and hypocrisy is just too much.
Paul,
What's with you and the ESB? Was your electricity cut off at one time?
It is self financing from borrowing originally and latterly from retained profits. It is a small utility company by EU standards and it is one of the most trusted brands in Ireland with consumers! It has served Ireland well. Far better than AIB, BOI, Anglo and Quinn Group.
My essential point is that we need to retain as many indigenous firms as possible as we have a shortage of them of scale. Privatising them esp now is not strategic.
It's interesting that when one presents a critique of the semi-states - and, in particular, of the 'granddaddy' of them all - it is suggested that a personal vendetta is being pursued. (Conversely, when I encounter those who struggle with the decentralisation of power that is required to restrain overmighty governments and who abhor the decentralisation of economic decision-making in well governed markets - to both of which Keynes held steadfastly throughout his life - I generally assume they are somewhat misguided or misinformed - though I can never be sure whether this is deliberate or unwitting.)
You can be assured I have no personal vendetta against the ESB. It is simply a strong revulsion to the way it has applied its efforts over time to exercise excessive dominance over the energy sector in Ireland - to the point where successive governments, the relevant department, the regulator and other state agencies and bodies with duties and responsibilities in the sector are either unable or unwilling to exercise restraint over it in the public interest. I am equally repelled and appalled by the way it has been able to subvert regulation to expropriate an excessive share of the disposable income of final consumers (in effect, virtually all citizens) to advance the management's self-aggrandising objectives and to pander to the workers' sense of entitlement to the flow of 'gravy' that Brendan Ogle described last year. And BGE is moving up strongly in the ESB's slipstream.
Rather than alleging a personal vendetta, it might make more sense to inquire more closely in to the facts and evidence on which my critique is based. The evidence is in the public domain - indeed it's 'hidden in broad daylight'. These include the annual accounts, the summary regulatory accounts, the recent regulatory determinations on the networks and the details of the network asset base which the CER spent almost 10 years concealing. It doesn't need a forensic accountant. It's just a bit of subtraction and addition. Go on. You'll find it very enlightening. I'm sure you were good at sums in school.
And, at the end of that, if you're still convinced that the consumer-gouging that is being perpetrated with official sanction generates benefits that outweigh the costs, then it would be useful to see some quantification of these benefits. Citizens would then be able to decide if the game is worth the candle. The semi-states are their companies after all.
I know it's a common tactic, but the so-called 'progressive-left' seems to run for cover faster than most when they run the risk ofconfronting hard data and evidence that might up-end their comfortable prejudices.
On a more positive note, however, a few days back Nat O'Connor expressed some interest in my ideas on how the infrastructure and utility sectors could be restructured in a ore productive and efficient manner - but suddently discovered that he didn't have time to puruse these issues.
Fortunately, or, pehaps, unfortunately for him, this issue has surfaced on a fairly influential Dutch energy blog in the context of the gas industry:
http://www.syntropolis.net/comment/2012/05/22/security-capacity/
I submitted a comment (just read down below the post) which sets out my basic ideas in this area - though, with some modification, they have relevance in all of the infrastructure and utility sectors.
Irrespective of which way this darned referendum goes, these issues will have to be confronted in Ireland. The Government has made a dog's dinner of them so far - even if they've held off on mucking it up even more during the referedum campaign - and, given their usual combination of arrogance, political calculation and ineptitude, I expect they'll keep going until we have the inevitable car-crash.
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