The announcement that a report by the commission of investigation into the Irish Bank Resolution Corporation has been delayed should not come as a surprise. Unless a number of legal obstacles, particularly in relation to privilege, are cleared then the commission will be unable to finish its work.
It was wrong of the government to set up a commission of investigation with such a wide remit in the first place, even though at the time it was the most politically expedient thing to do. In May last year the furore over the Siteserv deal involving Denis O’Brien threatened the stability of the Fine Gael-Labour coalition. A grand gesture was needed to draw a line under the controversy. Instead of dealing with the issues that were causing widespread disaffection, the government tried to kick the can down the road. As a consequence millions of euros of taxpayers’ money will be wasted on what will likely be an ill-fated enterprise.
However, after the banking crash — which meant that the state needed a €64 billion bailout from the taxpayer — a backlash against the Siteserv deal was inevitable, even though this type of agreement is common in a post-crash environment.
Siteserv became a lightning rod for perceived carpetbagging in the corporate sector at the expense of the taxpayer. In March 2012 a company controlled by Mr O’Brien paid €45.4 million for Siteserv, a construction services company that had €150 million in debts with IBRC, an amalgamation of Anglo Irish Bank and Irish Nationwide. There were widespread accusations of cronyism.
The popular narrative is that Mr O’Brien, one of the richest men in Ireland, received a €100 million state-sanctioned write off. The fact that Mr O’Brien has had close ties with Fine Gael and that a Siteserv subsidiary went on to win Irish Water’s contract to roll out meters nationwide added to public anger over the deal. However, the reality of what happened is very different.
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It is completely misleading to look at the Siteserv deal as a debt write-down. The liquidators of IBRC were responsible for recovering as much from its loan book as possible for the taxpayer.
In March 2012 Siteserv was teetering on the verge of bankruptcy. It had €150 million of debts that it could not service. If a buyer had not have been found, that €150 million would have been recorded as a permanent loss for the taxpayer and the company would have folded with the loss of more than 3,000 jobs.
The correct way of looking at the Siteserv deal is that €45.4 million was recovered for the taxpayer. It is just one of thousands of similar deals involving IBRC and the National Asset Management Agency. Often international investors picked up assets at a greatly reduced price but it is worth noting that the original prices were set during the property bubble and the property crash meant that values had plummeted.
Over the lifetime of the last Dail the government was constantly on the back foot because of accusations that the taxpayer had to shoulder the burden of the fiscal consolidation that was needed in the wake of the property crash while rich investors were able to pick up assets on the cheap. There is a great deal of truth in this view but in a small, open economy, there are not too many viable alternatives.
It added to the sense of unfairness that was a significant factor in the electoral meltdown of Labour and, to a lesser extent, Fine Gael.
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Instead of launching a commission of investigation the government should have done a better job of explaining the merits of Siteserv and similar deals. If it had, then there might not have been such a backlash against Irish Water.
The next government needs to mount a public relations offensive or trust in Ireland’s state institutions will drop even further.