The financial return on the proposed sale of the state’s forestry harvesting rights would only generate enough cash to pay three weeks of interest on the nation’s debts, the Oireachtas Committee on Agriculture was told today (Tuesday May 14th). Matt Staunton, IMPACT national secretary, described the likely return as “a few grains of sand in a desert of debt”. Mr Staunton added that, following the findings of a report by economist Peter Bacon, the sale would incur costs of €1.3bn to the state.
Mr Staunton said that the union is not opposed to change. “Positive reforms that would help secure the future of this vital public resource, and which would genuinely enhance the operation and profitability of Coillte, increasing its return to the exchequer and the taxpayer, would be welcome” he said.
Quoting Peter Bacon’s report, which was commissioned by IMPACT’s Coillte branch, Mr Staunton told the committee that “The economic rationale for the proposed sale of Coillte harvesting rights no longer stands up and cannot be justified.” He added that Bacon warned the State would remain liable for significant costs following a sale of the harvesting rights.
These costs, totaling €1.3bn, included losses of over €500m in Coillte profit flow, and a pension liability of €130m. Any sell-off would also create a €313m deficit for the state firm. Coillte would still be required to maintain forest lands, which would put a demand on state subsidies following the loss of income from timber product sales.
To cover the costs of the sale, Bacon had concluded that Coillte would need to sell timber at €78 per cubic metre, which is “well above current or recent prices.” The average price paid for Coillte supplies to saw mills recently has been just over €43 per cubic metre.
Mr Staunton added, “But for us, the biggest kicker in Bacon’s report was the estimated return on the sale of the harvesting rights; this is €774 million at an absolute maximum. With an obligation to use half those funds raised to pay off debt, as part of the Troika bailout agreement, this would leave just €387m. Bacon concludes of this figure that the funds raised would facilitate repayment of 0.2% of the total debt under this measure, or provide 6.2% of the interest cost in 2012, about three weeks of interest. Clearly, from an accounting point of view, this transaction is marginal almost to the point of being negligible.”
Mr Staunton told the committee that the proposed sale could also jeopardise up to 12,000 (largely rural) jobs in the Irish forest products sector, which is currently worth €2.2 billion a year, including €286 million in exports.
Lessons of previous state asset sales
Mr Staunton told the Committee that IMPACT, which represents 600 staff working at the state firm, believes that the proposal to sell Coillte’s forest harvesting rights must be seen in the light of previous state asset sales. “We make the observation that the state has often sold state assets in haste, and has then been forced to repent at leisure. There are two main reasons any sane government would consider selling a state asset; either to improve public services or to generate much needed cash. This proposal clearly meets neither objective.
“Since 1990, some nineteen state companies have been sold. Between them, they barely generated a billion punts. This was despite the fact that it was a much more favourable time for economic investments” he said.
Mr Staunton said that Eircom provided the most cautionary lesson. “It was sold with unseemly haste along with its entire essential infrastructure, then mercilessly stripped of its assets by several owners, and left with a significant debt. Eircom was a profitable company with a leading edge on the development of mobile and broadband technology. It was squandered for short term gains. The Eircom experience has hindered the development of broadband technology in Ireland quite significantly ever since. This has, in turn, put a dent in our economy’s international competitiveness.”
“We need to look beyond a post-Troika / post-bailout situation, and take stock of those assets which can be used to grow the economy again. Our state forests provide a fast-growing and profitable crop. We cannot afford to abandon its potential. IMPACT and other unions in the sector would gladly contribute to an exploration of any reform possibilities that exist” he said.
Mr Staunton added that the union had already contributed to significant reform at Coillte, supporting the company’s independence from the state sector and increasing profitability at the company.
He concluded, “The Minister has acknowledged that our arguments have been factored into the Government’s considerations on this issue. We need this committee to pass on the message that this is an opportunity for our parliamentarians to clearly state the forests should not be sold. They should be developed and enhanced. This is your chance to make it clear that to sell now – at such a significant loss – would be an appalling act of defeatism.”