When in September 1991 I resumed writing this column one of the first subjects I tackled was privatisation. At that time this subject was bogged down in ideological controversy, and it seemed worthwhile to endeavour to tease out, in as objective a way as possible, the pros and cons of privatising our State enterprises.
In that article I suggested that where a State enterprise was operating in an area that was not a natural monopoly, and might therefore be an appropriate candidate for privatisation, the possible benefits of the receipts from an early privatisation should be set against the possible loss to the State of a bigger return in real terms from a later sale of an expanded enterprise. I suggested, in particular, that an assessment of the relative benefits of an early or late disposal of Bord Telecom, as it then was, would be particularly interesting.
I doubt whether the fact that eight years elapsed before that body was privatised had much to do with my suggestion: I suspect that the eight-year delay in privatising this body is to be attributed rather to the slow pace of decision-making in our governmental system, especially when vested interests have to be tackled. But we must be glad that for whatever reasons the Telecom privatisation was delayed to the end of the decade, by which time the value of the company in real terms had multiplied many times over.
It can, of course, be argued that the use by Telecom Eireann of its monopoly situation as a State enterprise with a view to postponing or limiting competition during the intervening period had some negative effects on Ireland's competitive situation in the telecommunications sector. But these effects were temporary in character, and they do not seem to have prevented us from entering the new century in good shape.
Looking back, it can be seen that the first steps in this direction were taken as much as 20 years ago when the decision was taken to extract the telephone and postal services from the Department of Posts and Telegraphs (what an old-fashioned concept that name conjures up today) and to constitute them as State enterprises with their boards.
I recall, indeed, that it was in 1979 that Michael Smurfit approached me to tell me he had been asked to chair An Bord Telecom, and to inquire whether as leader of the opposition I would regard his appointment as a political one, to be revoked after a change of government, in which case he would not wish to take the job. I was able to assure him that if he took the position, as Taoiseach I would not be moved by political considerations to replace him.
Arising from that experience it struck me later that even if the political parties were unwilling to give up political patronage in State board appointments, there could be much to be said for a gentleman's agreement that at least the appointment of chairmen should be bipartisan, so as to ensure some continuity in leadership in State board policies through changes of government.
This would be all the more desirable in view of the fact that, unhappily, the arrangements I made in government, in conjunction with Dick Spring, to limit political patronage to one appointment to each board (breached only twice, I believe, in my period as Taoiseach) did not survive the change of government in 1987.
I believe an excessive proportion of party political appointments to State boards can have very negative effects on the success of these enterprises. While many political appointees have, of course, been successful board members, in my view several of the notable failures of State enterprises in the past 15 years or so reflect weaknesses deriving from the appointment of too many inadequate board members as a crude reward for services to a political party.
Of course, boards of companies in the private sector sometimes include "passengers", and the process by which board members are co-opted in such companies is also prone to abuse through an old-boy network. But the problem is less acute in the private sector, where the profit test and the need to retain the support of institutional investors limit the scale of abuse.
There have been suggestions that some State enterprises that are natural monopolies should be privatised. I doubt the wisdom of this. It is difficult to justify the privatisation of natural monopoly public utilities, e.g. water. The experience in Britain has not been good in respect of water privatisation.
It is true that private monopolies will be less prone to damaging political interference in the interests of political popularity, e.g. where cuts in staff or in services may be necessary to ensure the viability of the concern and thus secure the longer-term protection of the bulk of employment in the enterprise.
But that consideration is normally outweighed by the risk of abuse of a private monopoly situation and by the need to impose a complex and, as British experience seems to suggest, almost certainly defective system of regulatory control over such bodies.
Nevertheless, keeping services like the supply of water in the public domain cannot be justified if public ownership is used to inhibit water charges. The irrational resistance to the idea of domestic water charges in Ireland is - promoted by the left but benefiting largely the better-off - is now a serious problem.
If the public authorities are to be precluded from making any charges for the use of this scarce commodity beyond a defined amount reasonable for a private household, the resultant wastage of water becomes intolerable, and public provision of water supplies is brought into disrepute.
THE EU is clearly right, for environmental reasons, and in the interests of preserving a very scarce resource, to insist on some kind of water charges being imposed. The same is true of waste disposal.
A major reason for privatising State enterprises has been the constraint imposed on State enterprises by the incapacity of the State to fund their expansion. Shortage of State resources and constraints on public borrowing, together with EU laws limiting State investment in public enterprises, can all frustrate the ability of dynamic State companies to raise capital for their expansion.
Thus, Aer Lingus clearly needs capital for expansion if it is to hold its own in a highly competitive market, where Ryanair is forging ahead, using the proceeds of a successful public offering of shares. But, under EU state aids law the Government would have to apply to the European Commission for authority to invest further in the company, and would be required to demonstrate that this would be a genuine equity investment in the expectation of a financial return, rather than just further State aid; a contention that would inevitably be hotly contested by competitors like Ryanair.
The Government shows no stomach for engaging in this kind of exercise. Indeed, having burnt its fingers in a £175 million Aer Lingus bail-out several years ago, it has made it clear that it has no intention of investing further in the national airline. Additional capital will have to come from elsewhere.
The important thing for Aer Lingus is to have these obstacles to the financing of its expansion cleared so that it can develop without having both hands tied behind its back. In the case of the airports, it is more difficult to assess the balance between inhibitions to growth deriving from State ownership and the undesirability of transferring a natural monopoly into private ownership.
Thus far, Aer Rianta seems to have been able to finance the expansion of its facilities in this way, but if its future capital needs cannot be met from internal sources, thus requiring an inflow of private investment, there would be something to be said for Mary Harney's reported suggestion of breaking it into two companies and dividing the three airports at Dublin, Shannon and Cork between them, for in that way we would at least secure the advantage of some inter-airport competition.
Including its track costs, our small railway system is inherently loss-making. There is no case for copying the disastrous British model of breaking it up into a web of separate private companies. It must, therefore, remain in State ownership, as a social service.
Partly, of course, because of governments' unwillingness to curb commuter private motoring, commuter bus services do not seem to pay their way anywhere. Our problem here is gross under-subsidisation of these traffic-congested services, especially in Dublin. If traffic congestion is to be overcome, our commuter bus services should be much more heavily subsidised, while private cars should be required to pay the full cost of the road space they take up and road congestion they cause, at any rate at peak hours.
But subsidisation of commuter bus services does not require their operation by a monopoly State-owned company. Much greater efficiency and lower costs could be achieved by auctioning batches of routes to whatever company. This system has worked well elsewhere.
These examples demonstrate, I believe, that there is no single answer to the issue of State or private ownership of facilities currently owned by the State: each case is sui generis, and should be approached with an open mind, free from ideological hang-ups or preconceptions.