Houses of the Oireachtas

All parliamentary debates are now being published on our new website. The publication of debates on this website will cease in December 2018.

Go to oireachtas.ie

National Development Finance Agency Bill, 2002: Second Stage (Resumed).

Tuesday, 3 December 2002

Dáil Éireann Debate
Vol. 558 No. 4

First Page Previous Page Page of 294 Next Page Last Page

Question again proposed: “That the Bill be now read a Second Time.”

Mr. Deenihan: Information on Jimmy Deenihan Zoom on Jimmy Deenihan The purpose of the Bill is to establish a national development finance agency to assist in providing cost effective finance for priority infrastructure projects as an alternative to up-front Exchequer funding. It is proposed that the NDFA will discharge its functions through the National Treasury Management Agency and the aggregate funds it can borrow or guarantee cannot exceed €5 billion.

When the agency was proposed by Fianna Fáil with much hype during the general election campaign a commentator in The Irish Times described it as a piece of fancy footwork by the Minister for Finance. However, in view of the Portuguese experience some of the finance involved will have to be seen as Exchequer borrowing, even where it is borrowed by private operators. The legislation cannot, therefore, be used by the Minister as an excuse for not having to borrow.

The problem addressed by the Bill is that of project finance when the real problem is project management. This is evident in the huge over-runs with ongoing projects, be they roads, hospitals or schools. The Bill will not address this. The proposed new agency will be one more to add to the NRA, the NTMA and the recently announced Railway Procurement Agency. A plethora of agencies is now involved in borrowing money to finance major public infrastructure projects with little apparent interaction between them.

Section 5 provides that the proposed agency may form special purpose companies or SPCs. This system is used by county councils. I am a member of one. They are not working well at county council level. There was a greater focus when various committees were established to examine specific projects but these have now been integrated into SPCs.

SPCs will be able to borrow money for special projects, which will create another layer of bureaucracy How will it relate to the main agency? The National Treasury Management Agency could have established SPCs without the need to create a national development finance [910] agency. Perhaps the Bill could be amended to provide for this.

Despite the criticism of the proposed agency, I hope it will encourage public private partnerships and that these will become more fashionable in the funding of health, education and roads projects. In the United Kingdom approximately 500 projects valued at €40 billion are under way using this system of financing. They include 100 hospitals and 70 schools.

PPPs were first introduced three years ago and there are about 11 projects, most of which are for road building. Other types of projects are mostly pilot projects. The philosophy of PPPs has not yet taken off. I read in the newspapers recently that potential private sector consortia are now considering or threatening to abandon Ireland because of the so-called snail-like progress in the provision of infrastructure. My party had a billboard campaign about the Celtic snail about a year before the last general election and it was ridiculed effectively by a number of people. It may have been prophetic because that is what we have now. The roads are clogged up and there is traffic chaos and congestion across the country, even in small towns. The Civil Service system cannot cope with the demands placed upon it. As another commentator termed it the country is experiencing the slow snail syndrome.

A number of Deputies referred to their own constituencies when speaking on this Bill. We have heard some fine contributions from both sides of the House including the contribution from the Minister of State about infrastructural deficits in the constituencies. I now have the opportunity to refer to the national spatial strategy and the census report which have become available since I made my last contribution last week.

Two years ago Fine Gael employed consultants to draw up a party national spatial strategy. One of the growth centres identified as being suitable for future city status was Tralee. It is the ninth fastest growing centre of population in the country. The greater Tralee area has a population of 29,000 at present. It has grown in population by 10% since the 1996 census. The Fine Gael strategy document proposed that Tralee should be given the necessary infrastructure to enable further growth to be absorbed.

Kerry County Council subsequently made a presentation to the Government suggesting that Tralee and Killarney should be included in the national spatial strategy as a linked gateway. When the strategy was announced last week, it recommended link gateways between Letterkenny and Derry and Athlone, Tullamore and Mullingar – Dundalk and Sligo were to be separate gateways. It puzzles me why Tralee and Killarney were not considered as a linked gateway, as suggested by Kerry County Council.

If one reads the literature accompanying the national spatial strategy it is obvious that the first priority will be the gateways outside Dublin, the main five being Cork, Limerick, Shannon, Gal[911] way and Waterford. They will be prioritised for investment and population growth. The new gateways of Dundalk, Sligo, Letterkenny and the linked gateways of Athlone, Tullamore and Mullingar will be highly placed in the hierarchy. The hubs will be about third in priority and they are Cavan, Ennis, Kilkenny, Mallow, Wexford, Monaghan and Tuam. The linked hubs are Ballina and Castlebar and Tralee and Killarney.

When the Taoiseach launched the strategy he said that all other Government policies must and will be consistent with the national spatial strategy whether in transport, health, education or housing. Government policy will be consistent with the priorities set out in the national spatial strategy. Investment will be put first in the major cities then into the new gateways, the linked gateways, the hubs and linked hubs. A county such as Kerry will be low on the priority list.

The Minister, Deputy Cullen, stated that the national spatial strategy will inform and direct anyone making decisions regarding planning matters or spatial policy over the next 20 years. It will outline how and where to bring people, services and infrastructure together so that opportunities for investment are opened up across the country. Any investor coming into the country will study the spatial strategy and see the areas which the Government has highlighted and emphasised. Areas not touched by this strategy and not included on the map will not be prioritised.

I come from the heart of north Kerry. It has no rail link and no national primary road. It was once a prosperous agricultural area. We have been marginalised and ignored. The only time I remember seeing any activity was before the last general election when the Taoiseach came down in November to open a road built by the NRA. A bevy of Ministers came and made promises and announcements which were never delivered. When community groups look for the money promised there is no record of any commitment made. We will probably not see any more Ministers until before the next election. The area north of Tralee up to Tarbert and the Limerick border is ignored. I am a representative who lives in the middle of that area. There is no hope for that area in the strategy and in Government policy. We must try to do it for ourselves. Without local employment there would be little or no employment in the area. Farming is in decline and there is nothing to take its place and this spatial strategy will not help.

The Government rejected the idea of a gateway between Tralee and Killarney and decided on a hub. I was amazed that it did not put a linked hub in place between Killarney, Tralee and Listowel which would have linked Listowel into the focus of development in Kerry. The urban council and the chamber of commerce in that area are doing everything possible to bring investment into the town and are disappointed. I hope this Bill will provide for some spatial distribution of the projects. They should not be concentrated [912] solely around Dublin and the east coast. An effort should be made to place projects throughout the country. The Minister and his officials should encourage people to come forward with proposals for PPPs to ensure some kind of fair distribution and that the €5 billion should not all be concentrated in Dublin and on the east coast.

Dr. Devins: Information on Jimmy Devins Zoom on Jimmy Devins I am delighted to speak about the Bill. As Deputy Deenihan said, it was first mooted by the Minister for Finance prior to the last election. I am delighted he moved so quickly to bring the Bill before the House. It is complicated legislation but it is also innovative. There are three main advantages to the Bill. First, it will help Departments and local authorities to form an opinion on the need for, or the advisability of, getting finance for major infrastructural projects. Second, it can also advise Departments or, more importantly, local authorities on the best method to get the said finance. Third, because it has been given a budget of approximately €5 billion, it will be able, in some cases, to provide the finance.

We are all aware there is a substantial infrastructural deficit and it is important we move as quickly as possible to correct that deficit. The normal process where a project is put out to tender following design, implemented and built can be time consuming. I look to this agency as a great method to speed up the delivery of infrastructural projects.

I am particularly taken by section 5 which refers to the special purpose companies to which the previous speaker referred. I agree with him that we are bedevilled by various organisations going by their initials. In local government there are SPCs, but I think that refers more to special purpose committees. The special purpose companies to which this Bill refers are a method where the private sector can be brought in to help provide the expertise necessary to build infrastructural projects while at the same time – this is what I particularly like about the Bill – there is no State guarantee. Any benefits which accrue to the private company will be taken in the same way as in a normal, straightforward commercial venture.

Public private partnerships are the way forward. Yesterday I had the pleasure of attending the opening of St. Attracta's community school in Tubbercurry in my constituency. This is one of the first occasions a PPP has been delivered in the Department of Education and Science. This new school is an amalgamation of two schools – the Marist convent in Tubbercurry and Beneda Abbey. There are approximately 570 students in the school with about 44 to 46 teachers. The time from its incept to the time it was handed over to the Department was exactly 13 months. That must be a record. At the end of the 13 months the students and staff have a superb school building – possibly the best in Europe, and I do not say that lightly. They have science laboratories, which are the envy of many third level establishments, lecture theatres, religious rooms, a per[913] forming arts space, rooms for drama and music and woodwork and metal work facilities, which is appropriate given that Tubbercurry is the home of tool making in the north-west.

If that project had gone through the normal procedure and the Department of Education and Science had invited tenders, etc., it would have taken five years to complete. The standard of equipment in the school is first class. More importantly, the company which has undertaken this project has also entered into an agreement with the Department of Education and Science, which will eventually own the school, that for the next 25 years, it will look after all the maintenance. At no time during the next 25 years will the principal or staff have to involve themselves in any way in the maintenance or looking for finance for it.

The cost on the surface appears to be somewhat higher than normal but if this is looked at over 25 years, the students, who will go through the school during the next 25 years, and the staff will all agree it is money well spent. This process could not be compared with the normal process of procuring new schools. PPPs are definitely the way forward. To use them in conjunction with the special purpose companies referred to in the Bill will take an enormous risk from State funding. I also like the fact the chief executive officer of the National Treasury Management Agency will be the chairman of the board of the national development finance agency. There should be a close link between both bodies. I commend the Bill to the House.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose I thank you, a Cheann Comhairle, for allowing me to contribute to the National Development Finance Agency Bill, 2002. This Bill sets up another layer of bureaucracy or a quango. I have always opposed in principle the setting up of quangos. Once set up, they are inclined to remove elected personnel from the equation and, therefore, they are not subject to the same degree of political accountability, in particular, as is the case with bodies under Departments which are subject to departmental evaluation and can be brought before Oireachtas committees to account for various projects, overruns, time evaluations and matters of that nature.

We should subject this Bill to particular scrutiny at this time when it appears there is financial difficulty, however surprising that may be. We do not know to where the largesse has disappeared but we are told on a daily basis that there is nothing left in the kitty.

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern On social welfare, on tax reduction—

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose A lot of it has gone to the wealthy in reducing their capital gains tax from 40% to 20%. While looking after the well-heeled, it was brought in under the pretext that those people would release land and ensure that ordinary working class people would be the beneficiaries [914] by getting cheaper sites and getting houses. I did not see one couple or anybody else gaining as a result. Do not tell me it was reduced for the unfortunate people who lost everything they had in the Eircom privatisation. Although it has been reduced to nothing, it means nothing to those people who lost their few shillings savings. Many were elderly people who were left high and dry. Of course, the smart boys sold their shares quickly but the unfortunate poor people thought they could double a few bob – turn £3,000 into £6,000 in a short period – but nothing could be further from the truth. A lot of people gained much out of that.

As someone who pays the higher rate of tax, I have never been afraid to say that I should pay a bit more tax to provide services for the elderly, the sick or the infirm. Maybe that is the socialist philosophy and maybe it is wrong to articulate it at this point and to articulate the values of Connolly and Larkin – the philosophy which underpins our party. They are the values to which I aspire. I hope that in years to come, when I am old and dependent, people will be prepared to contribute to provide services for me.

An Ceann Comhairle: Information on Séamus Pattison Zoom on Séamus Pattison Deputy, you might be going into too much detail outside the Bill. A passing reference is acceptable but—

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose The Government has wielded the axe on all public expenditure. Over-administration has been one of the failings of our system. Why, therefore, does the Government feel it is necessary to establish a new agency to borrow money to ensure that the national development plan is put in place? Why not use the National Treasury Management Agency, to which Deputy Deenihan referred? It is an extremely capable body which has done a good job. Indeed it brought good news to the Minister for Finance the other day, saying the cost of borrowing was significantly lower than anticipated, which is good. It has made savings and is well placed to get the best borrowing conditions and everything else in relation to money.

The Minister for Finance, Deputy McCreevy, pooh-poohed our idea of reducing contributions to the pension fund. This is for future pensions, but of course the myth arose that we wanted to raid the current pension funds. There have been significant losses on the money that has been invested. We would be better off if that was utilised on some capital projects. I think the Minister of State would agree as he is an accountant who knows the value of these things.

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern So does the Minister for Finance, Deputy McCreevy.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose It is peculiar because it was seen as a bad idea when we suggested it. Part of the problem with Government nowadays is that no matter what suggestion comes from the Opposition, it is seen as ideologically driven and is per[915] ceived to be bad. We thought this was a good idea at the time. It is a way of getting a positive rate of return over a period of time.

The national development finance agency provided for in this Bill has its origins in the last general election campaign. The idea, basically, is to keep accounts off the balance sheet. It is off-balance sheet finance and the Minister for Finance, as a very proficient accountant, knows exactly what it is. I will not get into the nitty-gritty of it with him because he knows more about it than I do. It was obviously designed to allow the Minister for Finance to present himself as the great hero to the electorate. It offers a pretence that the Government is not actually borrowing at all.

The European Commission has to examine this in the context of the stability pact and has some critical analysis to offer of the justification the Minister for Finance has tried to put over. I do not believe that justification any longer exists. Where in the spectrum is this national development finance agency going to lie? Is it going to be somewhere between the National Roads Authority, which looks after the provision of finance for roads, the National Treasury Management Agency or the Railway Procurement Agency, which deals with procurement necessary for development of the rail system? Finding space amongst all those agencies will be a very interesting task.

There are obviously a number of issues of concern in relation to infrastructure. I am glad the Minister of State, Deputy Michael Ahern, is here because I know he is acutely aware of some of them. One of the things I have a particular concern about is investment in rail. It is a very important area for us all. Investment in rail is a very positive thing. I am a very strong supporter of investment in public transport. Over the years we have geared ourselves heavily for investment in public roads. This is necessary, but we have done so at the expense of the rail infrastructure. We are now trying to get back into some sort of shape but I think it will take us a significant number of years.

Early bird systems from Mullingar to Dublin, etc. take people off the road, thereby contributing to an improved environment. The problem is that rolling stock and various other aspects of the service are not matching the demand of the general public. Rolling stock which breaks down or does not have heating systems, a working toilet, etc. generate an adverse public reaction. There are also not enough trains. Thankfully, more and more people will move to rail but we must have rolling stock that is fit for this century. I know a number of people from the Mullingar and Longford area who utilise the early bird service and certain things are critical to them. People getting up at 5.30 a.m. to catch the train at 6.30 a.m. to get to Dublin by 8.30 a.m. cannot afford any slip ups. This is no fault of workers in Iarnród Éireann who are working extremely hard. If rol[916] ling stock is outdated or not up to scratch people are always working to try to catch up.

It is important that money is made available to upgrade rolling stock to ensure the normal conveniences and comforts of the travelling public are provided for. People are prepared to a pay a price for this but we must make sure a quality service is provided. This means getting people to their jobs on time, providing proper heating systems and toilets and having no breakdowns. Rather than having big queues we should add extra carriages to accommodate people. Deputy Durkan knows that people at Maynooth station could fill one of the four or five-carriage trains on their own. By the time people get from Mullingar to Enfield the trains are at capacity and a lot of people have to stand, which greatly annoys them.

We have heard about the 9% increase in Bus Éireann charges, but one young person rang me today about a 29% increase in the last eight months. We should be encouraging people to utilise public transport by making it efficient, cost-effective, comfortable and convenient in getting people from place to place. The environmental benefit of using public transport is enormous.

My local council has made it a central core of our development plan to re-open all the old railway stations along the link. There is one at Killucan in Mullingar. I see Deputy McGrath coming in, he will support me 100% in this. He was at a meeting the other night about the railway service, and like myself he advocated the re-opening of the railway stations at Killucan and the Hill of Down, as well as the link between Athlone and Mullingar. This would facilitate a huge number of students who travel from Mullingar to the very fine institute of technology in Athlone. It would ensure that they would not have to have accommodation in Athlone and would be able to get back to Mullingar and the surrounding hinterlands of north and mid-west Meath. Again there would be a positive environmental impact, as well as tremendous savings for parents.

We all welcomed the national spatial strategy. We in Mullingar were delighted to be accorded status along with Tullamore and Athlone, the important triangle of midland towns. This is a 20 year planning framework for the country aimed at achieving a better balance of structural, social and economic development between the regions and to encourage growth away from the east, particularly around Dublin, and back towards Mullingar, creating a critical mass necessary to attract development. It is important that the necessary financial resources are put in place to make this happen.

Significant projects have been submitted to the Department seeking funding in respect of infrastructural deficits in sewerage and water facilities in Mullingar and Athlone. Unless the funding requested is made available to make these projects a reality, they will be aspirational. Funding is also required for the completion of the N52, an important link road, in respect of which Deputy McGrath has led a strong campaign. The IDA has [917] acquired land in Marlinstown. Westmeath County Council, of which Deputy McGrath and I are members, has been involved in the acquisition of this land. The completion of the N52 link road will be essential to ensure such development comes onstream. The N6, the western route through Kinnegad, and the N4 are important roads that traverse Mullingar.

Deputy McGrath and I have spoken of the importance of ensuring work on the local hospital is completed. Phase 2B of the project spans five years and involves the provision and staffing of a 100 bed facility in respect of which nothing has happened. Are we prepared to invest the necessary resources? We must be prepared to provide adequate resources for the health area.

For the national spatial strategy to be meaningful it is important to make sure it serves as a reference point for all investment in coming years. I am sure the Government will look favourably upon the application from Mullingar, which is a comprehensive one supported by the local authorities, the trade union movement and the relevant agencies.

An Leas-Cheann Comhairle: Information on Rory O'Hanlon Zoom on Rory O'Hanlon We are not discussing the national spatial strategy.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose This is important in the context of the Bill, otherwise for what is this quango being created? It is supposed to access the money necessary to ensure these projects come onstream. I call on the Minister of State to make sure Mullingar is considered favourably in regard to decentralisation, otherwise the decentralisation proposal we have submitted, which is well supported across the county, will not follow the national spatial strategy. Excluding Mullingar would make a joke of it. That is an important point. If the strategy is to mean anything, it is abundantly clear that Departments and Government agencies must be decentralised to towns which have been designated as gateways or hubs. Mullingar is one of the few towns in the midlands where there has not been decentralisation to date. I hope the outcome for the town will be favourable.

An objective of the Bill is to ensure the necessary finance will be provided for various projects. There is a deficit in the provision of resources for infrastructural projects. Nowhere is this more important than in schools building projects. The findings of a survey of building work on primary schools published in today's newspapers would make the hair stand on one's head. The guts of 400 schools are affected. The Minister of State, Deputy Michael Ahern, referred to the elderly in relation to pensions and I accept his point. A decision to freeze primary school building projects is before the Department of Education and Science. Deputy McGrath is a teacher by profession and did a good job with many of us in his time. We were promised that the problems in this area would be solved before the general election.

[918]Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern We did not make such a promise.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose I was waiting for new schools to shoot up. Promises were made by—

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern We made that promise in respect of a five year period.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose That is important information.

An Leas-Cheann Comhairle: Information on Rory O'Hanlon Zoom on Rory O'Hanlon Could we return to the subject of the Bill?

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose I am speaking on the Bill. Will the necessary resources be provided to ensure 14 primary schools, Mullingar secondary school, Colaiste Mhuire, Colaiste Chionn Torc in Castlepollard and the Loreto Convent secondary school—

An Leas-Cheann Comhairle: Information on Rory O'Hanlon Zoom on Rory O'Hanlon I ask the Deputy to speak to the Bill.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose I am speaking on the Bill. Will the necessary resources be raised to ensure the promise made to the people that the schools in question would be looked after prior to the general election will be met? Substandard national schools—

Mr. P. McGrath: Information on Paul McGrath Zoom on Paul McGrath The Bower in Athlone.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose Deputy McGrath could list 100 of them. I am not as familiar with the education area as he is. Some 14 or 15—

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern The Deputy would not say that in his home town.

Mr. Penrose: Information on Willie Penrose Zoom on Willie Penrose I always give credit to Deputy McGrath. He always gave me credit in the agricultural area. Some 14 or 15 schools in County Westmeath alone are substandard. We also have a promise regarding a school at tender stage in Coralstown. I am opposed, in principle, to what is proposed. We should borrow to provide the necessary resources and use the National Treasury Management Agency to do so. All the schools to which I referred are productive. They have produced a long line of students who have graduated from third level. Money should be allocated to the primary sector.

We should borrow for productive purposes and not be afraid to do so. There would be a long-term return on such investment. It is important that we should examine this area in the round. There are tremendous infrastructural deficiencies across the country. We have a national development plan and, although I would have argued for different priorities, need a mechanism to put it into effect as quickly as possible. Creating a new quango will only gobble up the money allocated to the Department. It will not put tar on the roads, new rolling stock on the rail network or a roof on the educational buildings to which I [919] referred. This approach has bogged down infrastructural developments for decades to which we are just adding another layer. More of the same is what we can anticipate.

Mr. Sargent: Information on Trevor Sargent Zoom on Trevor Sargent Tá áthas orm labhairt ar An mBille um Ghníomhaireacht Airgeadais d'Fhorbairt Náisiúnta, 2002. Is tábhachtach an Bille é mar léiríonn sé polasaí an Rialtais seo ar fhorbairt na tíre. Baineann an polasaí sin le comhlachtaí príobháideacha is mó ag déanamh obair an Rialtais. For anyone who is doubtful about the purpose of this Bill, it could be paraphrased as a national borrowing agency.

An Leas-Cheann Comhairle: Information on Rory O'Hanlon Zoom on Rory O'Hanlon Does the Deputy intend to share his time with other speakers?

Mr. Sargent: Information on Trevor Sargent Zoom on Trevor Sargent I intend to share my time with Deputy Harkin, if she comes into the Chamber. I expect her to arrive, but cannot say for definite that she will.

This Bill effectively provides for a national borrowing agency. It is important to realise that we are speaking on the Bill with future generations in mind. In many cases the infrastructure being put in place will have to be repaired or even replaced sooner that it ought to be by future generations. One of the basic problems with public-private partnerships – the buzz phrase at the heart of the Bill – is that they encourage a lack of long-term thinking. The shareholders of the companies tendering for these public private partnerships want a return on their investment at the earliest opportunity. One way of doing this is to win tenders by providing the cheapest possible tender. This happens in public tendering also. However, in this case there is the pressure of shareholders trying to drive down the price to compete with each other in providing the cheapest possible tender.

The Minister for Finance may consider this a welcome development in that he may be able to report on budget day that he managed to get a certain number of projects completed at a price that initially was cheaper. However, in the long-term the repairs to the projects in question and the failure of those projects will involve an additional unforeseen cost on the State in respect of which the taxpayer will once again have to pick up the tab. In this case, however, it is a more expensive tab because it involves built-in flaws in cheap structures which are not built for long life.

I raised this matter recently in questions to the Taoiseach. The UK cannot report a good experience with public private partnerships. Naturally, companies try to tender as cheaply as possible but, in so doing, they have cut corners with the design and operational elements of the projects. This dates back to 1992 when the PPP principle became one of the main methods of building new public sector buildings. It involves transferring the risk of designing, building, financing and operating public projects to a private consortium [920] in a contract that typically lasts 30 years. The private consortium is paid a regular fee, according to how the service it provides performs.

Public private partnership schemes are a costly form of hire purchase and are only necessary because of restrictive public borrowing rules. This issue is often brought to our attention when rules are being set in Brussels. Many people in this country will wonder what type of quality they can hope for in the case of hospitals. Public private partnerships have been used in the UK to provide hospitals. The experience there is not great. There have been long delays in building new hospitals. In fact, ten hospitals were announced in April 1998 but there are delays in nearly all of them at present. In every public private partnership built hospital, beds and jobs have been cut to generate income and profit. Cumberland Infirmary, for example, has reported the ceilings collapsing because of cheap plastic joints. The sewerage system cannot cope with demand and the operating theatres are flooded. Similar reports come from Dartford and Gravesham hospitals, which were described at their opening, like Tubbercurry school, as state of the art projects.

Many hospitals and schools were built under the £43 billion public private partnership initiative, which is known in the UK as a private finance initiative. According to the British Labour Party's architecture expert, Sir Stuart Lipton, who is chairman of the commission for architecture and the built environment, they will be obsolete within a few years. He said that the British Government's desperation to deliver new public buildings was creating costly white elephants. He said, “The majority of PFI buildings are poorly designed and will fail to meet the changing demands of this and future generations”.

There is a risk in this country that the bad standards of building evident in Beaumont Hospital will be seen as a yardstick by public private partnership tendering companies. It was said on the radio this morning that 15 to 20 years is considered a building's lifespan after which serious repair costs arise. For that reason, there is a need to redefine the standards we will insist on if public private partnership projects are used to any great extent in future. I would prefer if they were not used.

We are facing lower standards because that is what we have experienced with the buildings that are already in place. Contrast Beaumont Hospital, which is in need of serious roof and window repairs and is leaking, with the buildings housing this Parliament. The main part of Leinster House was built in 1744 and this Chamber dates back to the 19th century. Repairs have taken place over time but the standard of craftsmanship here is not the standard public private partnerships will deliver. That has been the experience in other countries as well as in Ireland.

Last night on the news it was reported that Tubbercurry school was state-of-the-art. [921] However, I doubt that the Minister for Education and Science was giving the full picture when he said he believed it would be cheaper than if the State had built the school. How can he know? He is probably hoping that it will be cheaper but, having been a school principal, I know there will be unforeseen costs. If the job in hand is to be done by a private contractor, the contractor will seek the highest price possible. Although community employment schemes and other ways of providing staff in schools were inadequate, they are a far sight less costly than what a public private partnership firm will seek for work, since such firms will be anxious to maximise profits.

Even if schools such as Tubbercurry are built to a high standard, where will we get the public or private funding to deal with the many other schools? Approximately 400 schools are in need of serious work but that work will not proceed under the process that was promised during the election campaign. Schools which are 100% reliant on prefabs, such as Scoil an Duinninigh in Kinsealy, north County Dublin, will wonder how they will benefit from public private partnerships. Schools that are too small cannot avail of computer provision because there is insufficient room to install the computers. That is the case at Hedgestown national school in Lusk. Where do public private partnerships fit into their situation?

Many schools have toilets that are so damp that even cleaning them is difficult. That is the problem in Brackenstown in Swords. Then there are situations to which public private partnerships seem to have a simple response, schools facing such accommodation crises that to secure extra accommodation they are faced with the awful prospect of knocking down a protected building. That is something anybody would be reluctant to do and, hopefully, will not need to do. However, a gymnasium in a school in Ballincollig, County Cork, is to be knocked down without a second thought by a public private partnership company. The company concerned is Jarvis, which also built the school in Tubbercurry and has been involved in providing railway services in the UK. Unfortunately, however, it discovered it was unable to do that to a satisfactory standard. There have been a number of disastrous rail accidents in the UK.

That is the worrying aspect of PPPs. Tendering for a project does not always mean the company with the best tender is the best company for the job. It may have the lowest price tag, but who is to say it has the expertise, tradition and standards which will meet the requirements in the area of railway infrastructure, for example? It is all too easy to be hoodwinked by the price tag involved in a tendering procedure. I hope we learn the lessons and do not repeat the awful tragedies of the United Kingdom when it comes to building our badly needed infrastructure. The rail infrastructure is one area where there is a need for enormous investment.

I would look at schools in the United Kingdom to see where the public private partnership system has led the education system. Last week the [922] UK Department of Education called for an urgent report on chronically delayed public private partnership school improvement schemes which have been blamed by teachers for a slump in students passing examinations this year. Some 20 schools in Huddersfield and surrounding towns in west Yorkshire have seen severe disruption during the £59 million sterling partnership between the metropolitan district council and Jarvis. Projects due for completion in September are expected to run until Easter.

There are a number of examples of public-private partnerships which have lessons to teach us. We should be open to learning these lessons, one of which may be that public private partnerships are not appropriate to all applications which have been tried in other countries. We may benefit from the fact that we have not gone down this road to the same extent.

I would take stock when I see in the Bill that the National Development Finance Agency is to assist in providing cost-effective finance, that it will discharge its functions through the National Treasury Management Agency and that it will include experts with experience of corporate finance, risk assessment and delivery of major projects. Risk assessment, to date, has been appalling when one considers the flooding which has affected many parts of the country. Risk assessment, where housing and infrastructure generally are concerned, apparently does not take account of the degree to which flooding is increasing. I caution against leaving risk assessment to a body which is focused on the short-term returns for investment. If it is, corners will definitely be cut on projects in the hope risk assessment will not become too costly and flooding will not worsen during the years.

I would also take stock when I hear the prediction by the largest world insurance companies that, where risk assessment and flooding are concerned, by 2065 there is a terrible chance that insurance claims as a result of climate change will outstrip world gross national product. I imagine that is not something many public private partnership companies would want to hear because they would want to make their investment quickly and get out. They do not want to think in the long-term if they can help it, especially if it is going to be more costly.

Public private partnerships need to be re-examined. There is a temptation to say that, while we have experience in building roads with emigrants having built them in England for years, we do not have the same experience in building state-of-the-art railways such as Luas, which means we should engage a private company. This is seen as a selling point for public private partnership. However, the expertise needed to build Luas, for example, can be provided through public funding, capital investment from borrowing and a more prudent approach where the State retains the final say on how a project is to be developed and meet local needs. That is much more appropriate in the area [923] of public transport which is strategic and must be in place if business, life and communities are to survive.

Another area where public private partnerships are wholly inappropriate is waste. The most lucrative projects in a public private partnership arrangement for a private company are the large ones, such as incinerators or engineered landfill. They are projects which not only have knock-on effects in terms of environmental problems but also have the effect of creating an out of sight, out of mind attitude among the public. The belief is that the problem can be dealt with in this fashion and will go away. Unfortunately, the issue of waste is not like that. It will not go away but will be transformed in a way which will affect people.

We should take stock of our position and put in place policies which encourage local responsibility to the greatest extent possible rather than trying to hand the problem over to magicians who will try to make money rather than cast a magic spell. I caution strongly against public-private partnerships in forestry. If it is to be seen as a way of dealing with climate change, we need long-term planting, not the short-term rotation planting which public-private partnerships tend to encourage.

For the reasons I have outlined, the Bill is not appropriate to the needs of the country. It encourages the Government to divest itself of its responsibilities which become those of people who want to make a short-term profit.

Mr. P. McGrath: Information on Paul McGrath Zoom on Paul McGrath I welcome the opportunity of addressing the House on the Bill. I am glad the Minister of State, Deputy Michael Ahern, has confirmed that we misinterpreted the promises made before the previous general election relating to schools and that they are to be delivered upon over five years, not in the immediate future.

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern They will be delivered upon over five years in the same way all our promises were delivered upon over the previous five years.

Mr. P. McGrath: Information on Paul McGrath Zoom on Paul McGrath It is an interesting assessment to make of the promises made and an interesting interpretation of what was said in the many letters issued.

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern It is misinterpretation on the part of the Deputy who is twisting my words.

Mr. P. McGrath: Information on Paul McGrath Zoom on Paul McGrath In my area Deputy Cassidy gave commitments towards Coralstown school which was listed on the departmental website as being approved to go to tender with 29 others. Some 30 primary schools were approved to go to tender last April. Only 17 have gone to tender and seven have commenced construction. It is a disgrace that such commitments were given and not fulfilled.

[924]The Minister for Finance, Deputy McCreevy, was the only realistic member of the previous Government. When he heard his colleagues making these commitments and promises, he knew he had to do something. Having discussed it with his gurus, he devised the National Development Finance Agency to source the money to build all the schools which were promised would be built.

Mr. Durkan: Information on Bernard Durkan Zoom on Bernard Durkan Another fine one.

Mr. P. McGrath: Information on Paul McGrath Zoom on Paul McGrath The important thing was that the Minister, as an accountant, was concerned about having his books balanced. Tonight I am sure he is in the Department of Finance scratching around every possible corner because he wants to come here tomorrow and say he has lived up to the promises he made over the past five years. He has been trying to find pennies here and there and the savings bank will be robbed. Perhaps he will even go back to the social welfare fund and rob the workers of the country of the money they have saved up for the rainy day. He took €635 million from them this year and if he needs to balance the books again tomorrow, I am sure he will have another go.

The Minister came up with this idea of a quango which is to be established to help him out in order that he can borrow money off the balance sheet. The Minister of State, Deputy Michael Ahern, as an accountant, knows the constraints. This agency will allow a way to get around the requirements of the Maastricht treaty. The first four lines of the explanatory memorandum explain exactly the idea behind the Bill by stating:

The purpose of this Bill is to establish a National Development Finance Agency (NDFA) to assist in providing [this is the important bit] cost effective finance for priority infrastructure projects as an alternative to up-front Exchequer funding or unsuitable private sector funding.

Mr. M. Ahern: Information on Michael Ahern Zoom on Michael Ahern It is a very prudent policy.

Mr. P. McGrath: Information on Paul McGrath Zoom on Paul McGrath It is a means of providing an alternative to up-front Exchequer funding. We have to get it off the balance sheet and this is how the Minister has decided it will be done.

Something needs to be done because we have a huge infrastructural deficit. The national development plan is running way behind. Some 20 road projects have been shelved, many of which were mentioned by my constituency colleague, Deputy Penrose. Having read the national spatial strategy published in the last week and considering what is happening to the national development plan in terms of providing the infrastructure needed to implement the strategy, I wonder whether we are all living in cloud cuckoo land. When is this to happen? Is it the infrastructure or the national spatial strategy which comes first? I noted a paragraph in the strategy that stated regional development would [925] follow from the completion of the national development plan.

There are some projects which this agency could look after rather than having them managed under the national development plan, including the N52 around Mullingar. We are awaiting a planned eastern bypass of the town, but it is another project that has been put on the high shelf. It looks like it will not happen for the moment and the congestion around the town will continue even though Mullingar is a gateway town that is supposed to develop.

There are sewerage projects that are supposed to be undertaken under the national development plan. In Mullingar development has stopped because there is no more sewerage capacity and there is a problem in the centre of the town. No further development can happen until the sewerage problem is resolved. Will the National Development Finance Agency be able to provide the money to improve the sewerage infrastructure in Mullingar? I do not think it can and it is not suitable for this. Will it be used as an alternative way to get the finance for it?

What about the proposed toll road, the N4, between Kilcock and Kinnegad, that was due to start in April, but has now been pushed back? Will it proceed by way of PPP or will it be financed by this new proposed agency? Is that to happen? Has the Minister changed his mind on this also? Toll roads will pose problems for certain sections of the community in parts of the country. Motorists will have to pay on a toll road from the midlands or the west to Dublin, but will be able to travel from other parts, for example Waterford, and not have to pay to get to the capital. Why should some sections of the country be penalised in this way when other sections will not? Is this fair? Surely other systems should be considered, including the idea of shadow tolling, which is successful in many places.

What about funding for rail services? Deputy Penrose mentioned a very interesting meeting we had recently with some commuters who use the commuter line between Dublin and Mullingar. It is remarkable that Irish Rail invested about €50 million in upgrading the line between Mullingar and Dublin, but forgot to seek additional carriages. The line has been upgraded; we have continuous welded track and a new signalling system, while some of the platforms have been extended, but we will not have the carriages for another while. Old carriages are being used on new lines and we expect people to use it as a commuter service. This is totally unsatisfactory. If the Bill is to mean anything and result in improved infrastructure, we must look at those kinds of provisions and see what can be done.

Four PPPs have been established for schools around the country. Will the National Development Finance Agency replace the need for such PPPs? On television last night we saw the magnificent job that had been done through such a partnership on the school in Tubbercurry. How much will be repaid by the State to the company [926] which put up the money for that project? What will be the total cost to the Exchequer over the protracted period of the contract? What would have been the cost to the Exchequer if the school had been built up-front and operated in the normal way? Was there a saving to the taxpayer? Will this not be the major criterion?

The explanatory memorandum to the Bill states the functions of the agency will include:

providing advice to State authorities, including Government Departments, to assist them [this is the important bit] in evaluating financial risks and costs and ensuring that they avail of the best financing package for each project.

What risk was involved for the private company which built the four schools in question? Was the State likely to go bust? Was it not likely to get its money? Was the school likely to get wrecked or fall down? Where is the risk? Since there is no risk, what is the net return to the promoters on this project in terms of financial gain? If it was successful, why are other Departments not doing the same?

It is interesting that the Bill is being introduced when we need infrastructure. Over the past three years I have been dealing with the Office of Public works in relation to a Garda station that I know particularly well because my father was the garda stationed there for years. It had become run down and there was a substantial piece of land in the centre of the village belonging to it. A local builder proposed taking over this land and building a house with a Garda station to the specification required by the Garda authorities. He was told this could not be done. That is the kind of project that should have been taken up. It would have happened very quickly and produced a very satisfactory arrangement in the end.

However, the Office of Public Works decided to build the Garda station. It contracted the same builder to build it and divided the land. There is now a nice new small Garda station on half the site and a large plot of land behind it. I do not know what they intend to do with this or who will maintain it. It will probably be sold off and I am not sure they will get the same value for money or returns on it because the site is no longer as attractive or valuable since they took half it away. Whereas one could have had four, five or six town houses on the previous site, restrictions have been placed on what can be done. I wonder who was involved in making those decisions and why it was done in this way. Why did they not at least examine if the alternative was worthwhile? This is the kind of creative thinking we need to move forward.

Mr. Hayes: Information on Tom Hayes Zoom on Tom Hayes I am delighted to have the opportunity to say a few words on the Bill. It is clear from the debate that this is an interesting Bill. It offers us an opportunity to give some thought to an issue discussed for some years in the House and at local authority level. The country has made great strides in recent years, moving from [927] being not very well off to being very prosperous. The national development plan, however, brought into focus the infrastructural development the State requires. Many people are disappointed that with our buoyancy, wealth and economic strength diminishing, this so badly needed infrastructure is still not in place. This brings us to the reason for introducing the Bill, namely, the search for ways to make cost-effective investments. I understand much of the Bill addresses this issue.

Champagne corks were popped and there was a great deal of glee and celebration in some villages, towns and counties last week. My constituency is in a county that was not even mentioned in the national spatial strategy announced last Thursday. County Tipperary is the second biggest county in the country. The south Tipperary constituency contains the town with the largest inland population in the country.

On reading the conditions for becoming a hub or gateway in the national spatial strategy, it soon became evident that not alone did Clonmel fit the bill, it exceeded the criteria. Without doubt, Clonmel's location gives it a better case for being included than many of the other towns which were included. The Minister will be aware of the towns I mean. They are those which were not expected to be included in the strategy. I was amazed and disappointed that County Tipperary was not even mentioned in the report. I have never witnessed such dejection and rejection on South Tipperary County Council among all members, including members of the parties on the other side, as I did at yesterday's council meeting.

Having been passed over last week, the fear now concerns decentralisation, which is due to be announced in the coming weeks and months. I refer to the cases of Tipperary and Carrick-on-Suir, two towns which have been lobbying for decentralisation for some considerable time. Tipperary, which is included in the RAPID programme, has been cited as the second poorest town in the country. This town once enjoyed considerable prosperity and had the densest milk producing area in Europe within a ten mile radius. This is a terrible position. At yesterday's meeting of our local authority people were aghast that we were not included in the national spatial strategy.

An Leas-Cheann Comhairle: Information on Rory O'Hanlon Zoom on Rory O'Hanlon I remind the Deputy we are debating the National Development Finance Agency Bill.

Mr. Hayes: Information on Tom Hayes Zoom on Tom Hayes I am making a few points.

An Leas-Cheann Comhairle: Information on Rory O'Hanlon Zoom on Rory O'Hanlon They must be relevant to the Bill.

Mr. Hayes: Information on Tom Hayes Zoom on Tom Hayes I want my message to be brought back to the Government. There is a great deal of merit in having an agency which considers spend[928] ing. The reason I mention the national spatial strategy is that I want to know the reason infrastructure is considered for the county when it is not even considered in relation to future developments within the strategy.

Some months ago I attended a meeting with the Minster for Transport, Deputy Brennan, in relation to the closure of the Limerick to Waterford railway line, a wonderful infrastructure. I am extremely concerned at the plans although I am aware the Minister directed CIE to postpone its plans until the publication of an imminent report. This railway line requires major investment. Its development would remove a significant amount of freight from our roads and assist in the transport of goods. There is major potential for the development of the line. While it would undoubtedly cost a large sum of money, the new agency would help to spend that money wisely.

When I joined South Tipperary County Council in 1991, the possibility of building a bypass around Cashel was being discussed. The estimated cost at the time was €6 million to €7 million. At our last meeting we were informed that the cost could be as much as €40 million. The land has still not been bought, despite the fact that the bypass is so badly needed.

The issue of flooding was raised earlier. Some four or five years ago the River Suir burst its banks causing huge problems for the people of Clonmel, particularly in the area of the old bridge. Commitments were given that investment would be made in the river banks, but this has not happened. The costs will have risen significantly since then. Perhaps some smaller works could be carried out. At a recent meeting an engineer told us that if it was his project he would do it at a tenth of the cost by just doing remedial works along the river banks and the bridges in the area.

There appears to be a backlog of work in many areas. It would be helpful if the new agency could introduce a level of guidance in regard to such areas. When one goes to the Office of Public Works it says it is the job of the council while the council says it is the duty of the Office of Public Works. Can we find out whose job it is to do the remedial work and alleviate the problem of flooding? A similar situation exists in regard to schools.

The development of villages cannot go ahead without sewerage schemes. Will this body make recommendations in this regard? We all know the villages in our constituencies that would benefit from these schemes being speeded up. It is important that we promote village development and that requires proper infrastructure.

I may have wandered off the subject somewhat but I had a lot to get off my chest, particularly in regard to the spatial strategy. There is no point bringing in legislation and regulations if we are not going to stick to them and ensure they benefit everybody.

Ms Enright: Information on Olwyn Enright Zoom on Olwyn Enright I welcome the opportunity to speak on the proposed creation of the national [929] development finance agency. Like my party colleagues, I have a number of concerns in regard to the Bill. It creates another layer of bureaucracy. It is another quango of which we have enough as it is. I am particularly concerned that it will take on a life of its own and that it will not be controllable by the elected representatives. Instead of being accountable to this House this agency will become another door shut to democratic accountability.

The aims of the Bill appear laudable. Some of the terms used in the explanatory memorandum and the introduction to the Bill were lost to the Government up to now. One such phrase is “cost-effective” and another is “priority infrastructure projects”. We have not seen any real prioritisation in any Department in the past five and a half years. Nor have we seen any cost-effectiveness or value for money.

The Bill does nothing to tackle the real issue at stake. An agency whose purpose is to raise money to finance projects under the national development plan ignores the mess in which the plan is currently. I welcome the fact that the national spatial strategy has finally been launched. Two and a half years ago when the national development plan was launched, I realised it was the wrong way around. It is sheer madness to launch a plan that spends money before there is a strategy in place. The national spatial strategy has been welcomed with fanfare in some areas and lamented in others. The launch of the national spatial strategy at this stage is a case of closing the stable door after the horse has bolted.

The national development plan has been in operation for the past three years and this adds another layer to it. The Government is only now deciding on which areas to focus in regard to the national spatial strategy. Through the creation of the national development finance agency, it is trying to create a vehicle to raise finance to implement both the plan and the strategy, one of which has been in operation for three years. That is a most unusual way to go about things and it is hard to understand the logic underlying it.

Previously, the biggest problem the Government faced was not the raising of finance but the choice of project, its design and operation, although that is no longer the position. My colleague, Deputy Richard Bruton, stated the case most effectively when he spoke on this Bill. Instead of addressing the waste in the whole process and endeavouring to get value for money, the Government has concentrated in the National Development Finance Agency Bill on generating money by any means available. This is a mistake we may come to regret.

We all accept the huge problems created by the slow rate of delivery under the national development plan. It is a massive problem for the country and is having serious effects on every Department. Expectations were high when the national development plan was announced. It was greatly welcomed but its delivery has not been forth[930] coming. Nobody is taking responsibility for that problem. Nobody in Government is putting up his or her hands saying mea culpa. It is the fault of somebody else. Someone has to accept responsibility for the lack of delivery on the national development plan. The main purpose of the Bill seems to be to make somebody else responsible and to have somebody else to blame.

The scenario is akin to my experience of a year and a half ago as a county councillor. No elected representative could do anything about any issue under the national roads building project. It was out of our hands. It was very easy to say that nothing could be done, as it was the responsibility of the National Roads Authority and neither the local authority nor the Minister for the Environment and Local Government had any control over it. I am afraid that is the direction in which we are going with this Bill also. It allows people to say they would like to help but they cannot. It is a very easy political option and one in which any politician can see the attraction. The rightness of it is another issue altogether. We are elected to make hard decisions and we should have the courage to make them. This is an attempt to pass the buck and to do so as quickly as possible instead of a real attempt to deal with the situation.

The Bill provides that State authorities are obliged to seek advice from the agency on the types and size of projects being developed. It is great that it can do so, but there is not much point in seeking the advice of experts if it is not going to be taken. There is no obligation on State authorities to take the advice given, a serious flaw that needs to be considered. Maybe there is a proposal to rectify this and make it mandatory but if that is not the case then it should be. If the Bill is to have any teeth then the national development finance agency must be allowed to comment on schemes emanating from Departments. It should be in a position to give advice on projects whether the advice is sought or not. If it is a pet project people do not always want advice.

The Bill outlines who is disqualified from being on the board. This is an area with which I have great difficulty and it is a feature of much of the legislation that passes through the House. Among the categories of disqualified persons are those with a criminal conviction, those who have been bankrupt and so on. We are not told about the kind of people needed on the board or what type of background or qualifications they should have. We are appointing people to the board on a negative rather than a positive proposition. People coming to sit on such an important board should have clearly defined qualifications. I hope the Bill does not come into effect but the numbers suggest it will.

Likewise, members will be appointed by the Minister of the day, but it is important that he or she should receive advice on those whom he or she proposes to appoint and that strict criteria are observed when making appointments in order that an individual with relevant experience is [931] appointed, not a friend of the Minister or a party member. We should be very strict about this.

I welcome the aspiration to ensure gender balance on the board with regard being paid to “relevant experience”. Relevant experience, however, is a requirement on the basis on gender balance, but not on other grounds. The Bill states, “as far as practicable there will be extra balance between men and women.” However, when there are five people on the board, gender balance cannot be equitable, but it is important that it should be achieved.

I hope when the Minister makes the appointments, he does not adopt a similar attitude to the Minster for the Environment and Local Government, who appeared on “Questions and Answers” last night, regarding women's participation in society, with which I take grave issue. When referring to membership of golf clubs, he cited one club as an example saying he did not think many women could afford the membership fee anyway. The Government should take note of such a comment and ensure gender balance in all legislation and when making all appointments in order that women are in the same position as men when applying to join any club or organisation. Financial restrictions should be fair and not differ between men and women.

I have not closed my mind to public private partnerships in general because that would be wrong. There are circumstances in which they could work effectively, but the decisions on which projects are selected are vital. We have limited experience in Ireland in this area and need to learn from the experience of others. The Bill does not address the project selection process and I wonder who will assess what projects are suitable for PPP. It is easy to discuss PPP now in tougher budgetary times.

Previous speakers referred to the new school project in Tubbercurry which has been welcomed as a fantastic facility because principals and staff have been freed to teach. However, we do not have experience in this area. A company will take over the building of the school as well as providing for maintenance, cleaning and IT support. Significant problems have been experienced in the United Kingdom in regard to PPPs and in similar projects there school life has been disrupted and standards have been affected while, in some cases, the work has been shoddy.

I am concerned that we should not put ourselves in the same position with standards slipping in a few years. It is easy to open a fine, new school today, but what it will be like tomorrow is another question. The Tubbercurry school has provided a positive experience, but it is early days. However, the contract is strong and the company will not be paid unless its work meets the necessary requirements. The school was built on time, is a top class facility and provides all the equipment and space the students need. It is great to say this about Tubbercurry school, but the Minister should ask himself whether it should not [932] be the case with every school on the day it opens. Does the Minister of State accept the Department of Education and Science is not providing such facilities and that the Minister must turn to PPPs because he is not able to ensure his Department can carry out the work to the required standards? If a private company can deliver a project on time, Departments should have the resources in place to ensure it can do likewise.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. M. Ahern): Information on Michael Ahern Zoom on Michael Ahern I thank Members who have contributed to the debate and was impressed by how well informed were some of the contributions. I hope it has proved informative for those who are following the debate outside the House. As the Minister for Finance stated last week, the Bill is an important part of the Government's plans to address the country's infrastructural deficit. When enacted, it will establish a national development finance agency which will endeavour to maximise value for money for the Exchequer in a number of ways, including through the identification of optimal financing packages and the application of commercial standards to the evaluation of financial risks and costs for each project.

While the NDFA will add an important dimension of financing advice and expertise to existing arrangements for developing infrastructure, it will not substitute or replace those arrangements. In keeping with normal democratic arrangements the Government will have overall responsibility for deciding social and economic issues and priorities. The responsibility for initiating projects, including PPPs, determining which projects will be prioritised and for individual project management will remain with the relevant Minister and PPP units created in particular sectors such as national roads or rail.

The PPP unit in the Department of Finance has responsibility for leading, driving and co-ordinating PPPs. Experts from the central unit have made significant contributions to developing the early pilot projects, stimulating a competitive market for PPPs and agreeing a framework for PPPs with the social partners. The PPP market has been developed from having no projects in place a mere two years ago to upwards of 40 projects at various stages of procurement currently.

The primary role of the Department of Finance's PPP unit is the creation of a comprehensive body of guidance on all aspects of PPPs covering financial, legal, technical, human resources and process issues. This guidance will set the context within which the NDFA will function. The agency will provide expert financial advice and, in some circumstances, may provide finance. It will underpin and augment existing arrangements and not replace, supersede or duplicate them, nor will it add another layer of bureaucracy.

Deputy Sargent criticised the private finance initiative in the United Kingdom. I agree there [933] were significant shortcomings in early PFI projects. Costs were high and, in some cases, quality was questionable, but the Government's programme is not a PFI and this is not the United Kingdom. We are implementing a pilot programme of PPP projects to build on experience of project implementation in Ireland, learn from best practice internationally, not only the United Kingdom, and ensure we achieve more effective, efficient and economical PPP projects. Many international experts have commented favourably on the progress made to date.

Regarding Deputy Deenihan's point on improving project management, the new agency will be available to provide financial advice for the relevant State authority throughout the procurement of projects. Moreover, there is an in-built tendency in PPP projects towards better project management because the risks in respect of project costs and the duration of the design and build phase are fixed in a contract clause.

Deputies Deenihan and Penrose raised questions regarding the NDFA's powers to create special purpose companies. These arrangements were carefully designed to ensure there would be no uncertainty about the statutory authority to discharge these functions, best practice could be applied in regard to governance and accountability of the agency and there would be a necessary differentiation between the NTMA core responsibility and the new functions of the NDFA in respect of the special purpose committees.

In response to Deputy Deenihan's other questions on PPPs, there has been considerable progress in bringing major projects to the market. In mid-2000 there were no projects whereas now up to 40 projects are at various stages of procurement and the construction of the bundles of five proposed primary schools is almost complete. The Tubbercurry school, as Members pointed out, was officially opened yesterday. CONNEX has been appointed as operator of the first Luas line under the programme and construction of the second West Link bridge is in progress.

Deputy McGrath asked whether the agency would provide finance for existing projects such as the Kilcock-Kinnegad road project or rail projects as well as future infrastructural projects. The Minister hopes to have the agency up and running early next year. However, none of the priority infrastructural projects, whether PPP or otherwise, will be delayed. If the NDFA can make a contribution to the delivery of existing projects, this will be done, but it is not intended to replace existing funding arrangements with NDFA finance in the short-term. The agency will examine whether it should become involved in refinancing PPP projects in the future. Added to these projects are PPPs in water services, education, health – as recently announced by the Minister for Health and Children – while it is intended that the Dublin metro will be procured by means of a PPP approach.

In the last year or so the Government has brought forward the State authorities PPP [934] arrangement pact. A framework for PPP has been agreed with the social partners under the PPF and new structures for delivering public-private partnerships have been put in place. The progress we have made with the public-private partnership companies compares favourably with any other country. The NDFA should achieve significant savings on project costs through negotiating optimal financing packages and reducing consultancy fees.

Deputy Richard Bruton and others raised the need to address infrastructural requirements. I fully agree that this country has many infrastructural needs and we are facing significant pressures in this area. It is vitally important that these infrastructural needs are addressed as a matter of urgency and in a way that delivers value for money. It is for this very reason that the NDFA proposal has been developed. The Minister for Finance wrote to the chief executive of the NTMA earlier this year about proposals to tackle our infrastructural needs. At the same time he asked his officials to examine practice in other countries that have used alternative financing mechanisms for major infrastructural projects, such as France and Portugal. The experience gained from the early pilot PPP projects indicated that Departments and State authorities needed specific expert advice to assist them in identifying the optimal finance packages for their projects.

The outcome of these deliberations is a proposal to establish the NDFA. It is precisely because the Government is determined to ensure our infrastructural needs are met and the future development of our economy secured that the proposal has been brought forward and dealt with as a matter of priority. The NDFA will help State authorities such as Departments to make the best use of their funding by identifying optimal finance packages for projects, whether this is provided directly by the Exchequer, the EIB, the NDFA or the private sector or some combination of these.

Regarding Deputy Deenihan's question about the national spatial strategy and the Tralee, Killarney, Listowel corridor, the appropriate State agency or procuring authority is responsible for bringing forward projects under its areas of responsibility. The NDFA will provide financial advice on whatever projects are brought forward. However, it will not have a role in deciding on any particular location for the projects.

Deputies Burton, Joe Higgins and others asked the reason the NTMA does not simply take on the task being allocated to the NDFA rather than set up a new body. Great care has been taken in designing these arrangements to ensure best practice has been followed in relation to the structures, staffing and governance arrangements for the NDFA. The skills and corporate structures required to undertake this important task are of a somewhat different nature from those available within the NTMA. The financing of infrastructural projects requires specific borrowing vehicles and corporate finance skills in [935] order to access capital at the optimal cost. The skills within NTMA will complement those within the NDFA. Staffing arrangements are also intended to avoid unnecessary or wasteful duplication of scarce talent and ability by allowing the NDFA to draw on the reservoir of skills and capabilities already available in the NTMA. Moreover, the governance arrangements for the chairman, board and separate chief executive officer in the NDFA should ensure the necessary differentiation between the different statutory functions of the NTMA and the NDFA is preserved.

Deputy Joe Higgins raised the matter of the provisions of sections 18(7)(a) and 18(7)(b), which restrict the chief executive officer and the chairperson from questioning or expressing an opinion on the merits or objectives of any policy of the Government, a Minister of the Government or the Attorney General, or from producing or sending to a committee documents which question or express an opinion on the merits of any such policy or such objectives. These provisions are a standard part of similar legislation enacted since 1998. For example, the provisions are contained in the Employment Equality Act, 1998, the Ordnance Survey (Ireland) Act, 2001 and the Competition Act, 2002, among others.

Deputies Richard Bruton, Joe Higgins and others raised the matter of who sets policies and priorities. This relates to ownership of projects. It is important to note that while the proposed legislation provides, in section 8, that State authorities will be advised to seek NDFA advice, the final decision on the structure and financing of a project remains a matter for the appropriate Minister or, where there is delegate sanction, the appropriate Accounting Officer or equivalent. It will be a matter for Ministers and Departments, as is already the case, to bring forward projects for approval and prioritisation. The role of the NDFA will be to advise on the optimal financing of these projects. In fulfilling this role the NDFA will faciliate infrastructure, not impede it. It will work with the State authorities to provide the best means of financing projects.

Deputies Richard Bruton, Burton, Joe Higgins and others raised the matter of the guidelines on State authorities seeking advice from the NDFA. The legislation provides, in section 8, that the Minister for Finance will issue guidance on the circumstances in which NDFA advice should be sought, taking account of the type of project, programme or project, the state of development of a project and any other relevant factors. The reason this guidance has not been prepared and published in advance is straightforward. The NDFA has not been set up yet and full guidance simply could not be provided in a vacuum. The guidance will be quite detailed and specific, dealing with cases as they arise. It will be drafted with input from a cross-departmental team which will include a representative of the Office of the [936] Attorney General in an advisory rather than executive capacity and the NDFA.

Several Deputies asked how the NDFA will maximise value for money for the Exchequer. The NDFA will do this by identifying the best financing packages and applying commercial standards in terms of evaluating financial risks and costs for each project. In addition, where it is able to borrow at better rates than the private sector, taking account of the degree of risk transfer, less State subvention may be required for capital projects.

Deputies Burton, Richard Bruton and others asked who will decide on the financial reporting of projects and if NDFA financing may affect the general government balance. The financing and the financial reporting of all projects, including those involving the NDFA, rests with the relevant EU body, EUROSTAT, which will decide on a case by case basis. The general government balance, GGB, is an EU measure of State finance which includes any non-Exchequer financing which the State or State organisation discharges. It is the critical measure of what can be accommodated within our obligations under the Stability and Growth Pact in the context of the Maastricht treaty. The impact of the NDFA financing on the GGB will depend on the nature of the projects being financed and, ultimately, rulings by EUROSTAT.

Deputies Burton, Richard Bruton and others suggested that one of the purposes of the NDFA was to finance infrastructural projects off balance sheet. This is not the case. The purpose of the new agency is to deliver value for money for the Exchequer by facilitating the best financial arrangements for projects. It will advise sponsoring agencies such as Departments, local authorities or statutory bodies on the optimal means of financing major infrastructural projects. It will provide ongoing financial advice as projects are procured and, in certain circumstances, will raise finance for projects. This, in turn, will assist in the delivery of key elements of the national development plan and other infrastructural priorities. The financial reporting arrangements for projects financed by the NDFA or through the special purpose companies will be the same as for other PPP type projects. The agency cannot and will not bring projects off the balance sheet of the public sector unless the main determinants of the categorisation of projects such as risk transfer and the presence of revenue streams from user charges are also present.

Question put.

A division being demanded, the taking of the division was postponed until immediately after the Order of Business on Thursday, 5 December 2002, in accordance with an order of the Dáil of this day.


Last Updated: 11/05/2015 09:35:39 First Page Previous Page Page of 294 Next Page Last Page