The false economy of selling state assets to fund job creation

Sinéad Pentony22/02/2012

Sinéad Pentony: Today’s announcement provides us with some more details on the government’s thinking in relation to the role of state assets in our economy. The position has become more nuanced in some regards, as the sale of the ESB appears to the off the table (with the exception of some power generators) along with the sale of Bord Gais’s transmission and distribution systems. However, privatisation remains a clear policy focus for the government and a bitter pill is being sweetened with the promise of the proceeds of privatisation being used to fund job creation. But this is false economy.

We are hearing a lot about supporting job creation at the moment. Last week it was the Action Plan for Jobs, this week the sale of state assets will be used to support job creation and tomorrow the government will launch its Pathways to Work - the Government Policy Statement on Labour Market Activation.

Last week's TASC report on the Strategic Role of State Assets, along with today’s statement, clearly articulate the trade-off between short term and longer term investment priorities, with the latter increasing the capacity of the economy to grow and compete with other advanced knowledge-based economies. So the sale of strategic assets is a critical issue because it could actually cost us jobs in the medium-long term if we don’t have the infrastructure that facilitates and supports the functions of a dynamic advanced economy competing globally.

Last week the Action Plan for Jobs was announced. Any initiative aimed at promoting job creation is to be welcomed, and the focus of the Plan is on improving the conditions for doing business in Ireland. While ‘bold ambitions’ are to be admired, it’s difficult to see how the target of increasing the number of people in work by 100,000 – from 1.8 million to 1.9 million jobs by 2016 - can be realised, when the next three budgets are expected to take a further €9 billion out of the economy by 2016. One can only imagine the sorry state that the country will be in, in three years time - if we continue on the current path of austerity piled on top of more austerity.

On Monday night the Frontline programme was devoted to discussing the Action Plan. One of the panellists was businesswoman Glenna Lynch whose business has been struggling since the onset of the crisis and she has been forced to let people go. When asked what she thought about the Action Plan, she said that there was very little in it for her and that the problems she faces relate to the fact that successive austerity budgets are sucking money, demand and confidence out of the economy.

Pathways to Work is being launched tomorrow, the objective of which is to “drive the introduction of measures to improve the conditions for job creation across the economy and to ensure that the creation of these jobs feeds into a reduction in unemployment”. Our labour market activation policies have long been in need of reform, and they must reflect the complexities of the labour market in a modern economy.

In general the Action Plan for Jobs and Pathways to Work can be described as ‘supply-side’ measures, aimed at creating the conditions for businesses to create jobs and for people to be in a position to the take up jobs.

But how can businesses create jobs when the demand for their goods and services is static or shrinking because of budgetary measures?

What’s needed are a series of ‘demand-side’ measures aimed at creating demand for labour, and this requires investment. But this investment should not be financed from the sale of state assets, which should rather be used to support investment in the medium term. Instead, much needed short-term investment should be financed through the €4.7billion remaining in the NPRF, along with an initiative that allows part of the €5.3 billion held by Irish pension funds to be invested in infrastructural projects.

Posted in: InvestmentFiscal policyFiscal policy

Tagged with: privatisationjob creationinvestment

Sinéad Pentony

Sinead Pentony

Sinéad Pentony is Associate Director with the Trinity Foundation, Trinity College Dublin working towards securing private funding and other support for a range of projects - primarily from individuals, companies and foundations.

Her fundraising portfolio includes supporting the Schools of Computer Science and Statistics; Mathematics; and Pharmacy and Pharmaceutical Sciences to deliver on their strategic priorities with the help of philanthropy support and sponsorship.

She has been working in the not-for-profit sector since the mid-1990s and generating income and fundraising has been a key part of her roles. She develops strategic relationships with a view to delivering mutually beneficial outcomes.

Her previous roles have involved undertaking research and policy work across a variety of public policy areas, policy influencing and advocacy work with a wide variety of stakeholders, public communications, lecturing, and leading or supported strategic planning and review processes aimed at refocusing the work of programmes and organisations in a changing context.

Sinéad was previously head of policy with TASC.


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