Public Subsidy, Private Profit
At the beginning of this year, news emerged that the Irish Strategic Forestry Fund between Coillte and Gresham House. Under this so-called ‘deal,’ Coillte will ‘source’ the land for the fund and carry out the planting and management of the forests, while the fund (not Coillte) will benefit from forestry grants and premia.
The most relevant question is why is the Irish Government asserted that there will be no sale of lands while simultaneously arguing that the State Forestry Company is a private entity? The question is if this a transfer of state lands to private funds, and what Gresham House meant when it stated that existing forestry lands would be utilised.
Oireachtas Debate on the Coillte announcement
On the 19th Of January last, Tánaiste Micheál Martin made the following points on the Coillte/ Gresham House Private Fund:
- That there would be no privatisation of public land under the Coillte plan to sell land to the British investment fund, Gresham House.
- Coillte would not sell privately-owned forests as part of the deal. However, Gresham House have stated that existing forest lands are to be utilised.
- The Government did not run the semi-state company, this position that Coillte is a private, not a public company is in defiance of an EU Court of Justice decision on the issue.
- That the policy is to increase the amount of land under afforestation to 18% by 2050. Coillte does not legally need the approval of government to implement its plans and that the Government wants farmers to drive the bulk of the forestry.
The latter is an indication that this process is the first stage of privatisation for Coillte. Farmers are investors in the resource (land in this case), and - the Government has argued - Coillte is a private company in its operations. In essence, the Government (and Coillte) are implying that Coillte is a private company with public obligations.
This argument is also an attempt at a legal defence, when Coillte proceeds to transfer state land, either as part of this deal or with subsequent related arrangements. These actions, it is implied, are a private matter, and were not politically endorsed by the Government.
Inherent Investment Value
The Minister for the Environment Eamon Ryan asked rhetorically why ‘Ireland’ should be selling to a British investment forestry firm in order to meet its green forestry targets by 2030 instead of doing it themselves.
Coillte's reply was the "current rules around State aid rules preclude them from doing it". "My response to that is we should look to change the rules, look to the European Union...and look at other mechanisms where we the public can invest and own the land that new forest systems go into."
This assertion of inherent investment value contains the nucleus of the privatisation rhetoric used in the sale of British Gas and Telecom Eireann where ‘investors’ (rhetorically described as the public) were issued (largely valueless) shares on behalf of the soon to be privatised state companies.
State Aid
Speaking of state aid, the Gresham House fund already has an investment of €25 million in place from the Ireland Strategic Investment Fund, which invests taxpayers' funds on a commercial basis and is owned by the National Treasury Management Agency. This would have to be have been agreed by the Minister for Finance as the NTMA is an agency of the Department of Finance, it is also State aid to a private investment fund. The ‘loan’ constitutes state aid, another reason why the Government is maintaining that Coillte is a private company.
The Irish Strategic Forestry Fund
The Irish Examiner considered the advantages to Coillte to be ‘obvious,’ considering it cannot of itself avail of EU and State subsidies for planting on land that it ‘owns.’ There is a reason that the Irish Government states this position so forcefully, in that it reinforces the self – declared status of Coillte as a private company and investment vehicle.
In 2003, the European Court of Justice gave its final ruling against Coillte’s claim to be paid compensation grants to which only farmers (using part of their land for forest cultivation) were entitled. The ruling stated that Coillte misrepresented itself as a “private-law legal entity”, whereas they were in fact a “public entity wholly owned and controlled by the State”. The pretence by Coillte that it is a private company has been echoed by the relevant Irish Ministers, then and since.
Coillte and its self-declared Private Status
As we wrote in the Tara Foundation magazine in 2007, "Coillte has been falsely represented as a private company by the State for a very good reason: to pretend to have a legal title to lands it does not, in fact, own. The forests of Ireland belong to the people of Ireland: this position has been established in law. Coillte’s statutory role is as a caretaker of the property of the people of Ireland. It has no legal entitlement to transfer the land in its care to private ownership, nor receive money in payment for it."
In effect, the Irish Government has attempted to designate a public body as a private company, in its operations with farmers., and this is the reason that Ireland cannot access EU grants for the purpose of afforestation.
The Government’s problem and Coillte’s solution
Given Coillte’s extensive profits, it seems relatively simple to use a portion of these to engage in extensive non-commercial reafforestation, regardless of the comparatively small amount of EU subsidies available. These should not affect forest policy.
However, Coillte does not regard itself as a public company, but is directed by Government policy to act as a private entity, and increasingly., preparing itself for sale. The establishment of this fund is the first stage of privatisation of public land, in a process clearly calculated to cause further land price inflation in private land, a by-product of this intensified commercialisation of forestry policy.