There are two pieces in today’s Irish Times on state guarantees for downside risks. The first is on toll roads: We apparently guaranteed an income stream. The second is about the power network: There is no need to budget properly and hedge your bets, as the cost can always be passed on to the customer. Other examples are the REFIT scheme, which puts a price floor under renewables, and the put-or-pay contract for the Poolbeg incinerator.
Such guarantees reduce the downside risk and hence the cost of capital for the investor. That is fine if the investment is in a public good.
However, the downside risks are transferred to the taxpayer, while the upside risks are enjoyed by the shareholders.
I would therefore introduce a special profit tax, which applies to operations that have a state guarantee against downside risks. In that way, the taxpayer shares in the good times as well as the bad. It would also make companies think twice before demanding a guarantee.