THE MCCARTHY  REPORT has recommended a planned programme of state asset sales to contribute towards the reduction of national debt.

However, the review group behind the report said it does not recommend selling all state assets and says specifically that gas and electricity assets should not be sold to private interests “in the immediate future”.

The commercial state bodies covered by the report include the Dublin Airport Authority, An Post, RTÉ, ESB, EirGrid and Coillte. It did not cover the banks, NAMA or the VHI.

Recommendations

The report says that it is “not sustainable for the state to continue to borrow at current levels and all avenues for reducing expenditure and raising additional revenues must be explored”, and concludes:

Our basic message is that, given the over-borrowed nature of the state’s balance sheet, asset disposal is inevitable. This should take place on a planned, phased basis to maximise value to the state from any such disposal. Any programme of sales should balance the longer-term strategic needs of the state with the short-term urgent demands for cash and should do so in a prudent manner.

Among its recommendations, it suggests:

• The electricity transmission grid should be transferred to Eirgrid and retained in public ownership as a regulated monopoly, and the ESB should dispose of further generating capacity in Ireland.
• Ireland’s ports should be restructured as several competing multi-port companies.
• Bord na Móna and its peat-extraction rights (but not peat land ownership) should be sold off as a single entity.
• The state should begin selling Coillte’s forest and non-forest assets (but not its forest land) and Coillte’s replanting obligation and grant-aided forestry should be discontinued.
• The portion of the licence fee allocated to the Broadcasting Fund (currently 7 per cent of the licence fee) should be “increased substantially” to better equalise competition conditions between RTÉ and private broadcasters.
• The National Stud and the state’s shares in Aer Lingus should be sold.
• The Health Insurance Authority should be absorbed by the Financial Regulator and economic regulators should be relieved of their “extraneous administrative functions”.
• If water charges are introduced, they should be regulated by the Commission for Energy Regulation rather than appointing a separate regulator.
• Pay and conditions “in all commercial state companies” should be compared with others in the Irish workforce and in competitor countries to gauge their competitiveness.

No state asset fire sale

The report states that although the sale of state assets can help to ease the government’s debt burden, the focus should be on the “promotion of longer-tern [sic] economic growth”.

Speaking at the publication of the report, Minister for Public Expenditure and Reform Brendan Howlin said that the government would study the report’s findings and recommendations “in detail”.

Howlin said that the state’s non-strategic assets of up to €2bn would only be sold “when market conditions are right and when regulatory structures have been established to protect consumer interests”.

The report was compiled by a review group chaired by economist Colm McCarthy to assess the potential for state asset disposal and to compile a list of possible state assets to sell. The group was also charged with assessing how state assets could best be used to restore economic growth.

Read the McCarthy report in full >