State Authorities (Public Private Partnership Arrangements) Bill, 2001: Second Stage (Resumed).

Friday, 14 December 2001

Dáil Eireann Debate
Vol. 546 No. 6

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

Mr. M. Ahern: Information on Michael Ahern  Zoom on Michael Ahern  I welcome the opportunity to contribute to the debate on this important Bill.

The Government is harnessing the potential of public private partnerships to help deliver the conditions needed to sustain output and employment in the economy over the medium term. The economy's performance during the 1990s was remarkable. Growth, as measured in terms of GNP, has averaged over 8% per annum since 1994, employment rose by more than 50% during the same period and the rate of unemployment fell from 15% to 4%. The size of the economy has almost doubled in a relatively short period. This growth has been led by significant gains in competitiveness and extremely high levels of business profitability. Rewarding enterprise and risk-taking is a key element of Ireland's success. While the rate of growth has slowed down, the economy is set for continued strong growth well into the medium term.

It is projected that growth of approximately 5% per annum can be sustained during the next decade. This is above the 3% projected for the EU economy as a whole. As a rapidly growing entity within the euro zone, the Irish economy represents a broad range of positive investment opportunities. Public private partnerships will play a significant role in this area.

During the past two years administrative and management structures have been created to assist the development of an effective, efficient and broad infrastructure programme offering new opportunities for the development of public private partnerships in Ireland. This development rests on firm foundations. There has been a long and fruitful tradition of close co-operation between the public sector and private business in Ireland. Throughout the past decade of strong economic performance, high level co-ordinated economic and social policy priorities have been [1399] based on partnership agreements between the Government, employers and industry representatives, trade unions, farmers organisations and, more recently, the voluntary sector. These agreements have been the foundation for fiscal consolidation, the maintenance of sustainable growth in investment, rising real disposable incomes, employment growth, the reversal of emigration trends and a reduction in unemployment to an historically low rate.

The most recent agreement is the Programme for Prosperity and Fairness. In common with earlier agreements, the PPF contains clear commitments to a shared income and to fiscal and social policy objectives. The programme also reaffirms the commitment of the social partners to the PPP process. In particular, it provides for the formulation of an appropriate framework for the management and further development of the public private partnership process. Confidence in the future development of public private partnerships in Ireland is rooted in practical examples of fruitful co-operation between public authorities and private business. In the past decade, two toll roads across the River Liffey in Dublin, which were privately designed, built and financed are now operated by the private sector. The provision of decentralised Government offices and, recently, a public private partnership approach to prison building are other examples of successful projects involving elements of the PPP approach. The Government is now bringing a more structured approach to private sector involvement in the procurement of economic infrastructure priorities.

Why public private partnerships? The case for adopting a more structured approach to PPPs is clearcut. Submissions from IBEC and the CIF in the late 1990s set out a clear and compelling business case for the development of the PPP concept. These submissions were followed by a consultancy on public private partnership commissioned by the Government, and the consultants' report recommended the creation of formal structures to manage public private partnerships and the designation of a series of private projects across the various sectors. The consultants concluded that there were no substantial statutory or administrative impediments to the development of PPPs.

The economic case for public private partnerships has been strengthened by the prolonged period of exceptional growth in output in Ireland, which has continued from the mid-1990s to earlier this year. The doubling in size of economic activity in Ireland since 1993 is putting pressure on physical infrastructure, especially in public transport and on the roads. Higher standards set by EU directives and international conventions are demanding increased investment in the environmental area. Preserving our green environment requires better quality water supply, improved waste water treatment facilities, new investment in waste management infrastructure [1400] and an innovative approach to waste recovery and recycling. These needs are recognised in the current national development plan, and the role of PPP within the NDP is to provide an added impetus to the infrastructure programmes and adopt a systematic and structured approach to the involvement of the private sector.

The precise designation of public private projects will be decided as the national development plan projects are implemented. It is clear that the key criteria for selection are long-term value for money and the priority of the project at national level. Acceleration of the overall national development investment programme and early delivery of individual projects are the key objectives for the PPPs. These objectives can be obtained through the effective management of the process and the advantages of the public private partnership approach include optimal risk transfer, that is, the allocation of risks to a party best able to manage them and at least cost rather than simply loading risk onto the private partner. It also has an advantage with regard to the life cycle costing which recognises long-term cost factors in addition to the initial capital expenditure, direct payments and user charges which incentivise value for money and relate project costs to utilisation of the assets.

In the area of competition, there is another advantage because it generates more efficient and effective resource allocation and productivity. Also, private sector innovation and technological, financial and management expertise can be captured by a PPP approach to projects traditionally within the sphere of public authorities.

The Government, following acceptance of the recommendation contained in the consultancy study to which I previously referred, established a central PPP unit in the Department of Finance to lead, drive and co-ordinate the process. In order to ensure that the implementation of the projects is overseen at the highest level, the Government established a Cabinet sub-committee on infrastructural development and public private partnership. It is chaired by the Taoiseach and its membership includes the Tánaiste and Minister for Enterprise, Trade and Employment, the Minister for Finance, the Attorney General and other senior Ministers serviced by a cross-departmental team.

The genesis of the public private partnerships has been significantly different to the beginnings of the private finance initiative of the UK. The drivers in Ireland are accelerated delivery of national priority infrastructure projects, together with the attainment of value for money over the full life cycle of the asset rather than the procurement of public service assets off balance sheet. The process involves structured consultation with the key stakeholders. The Government has adopted a pilot project approach to developing the market for the PPPs. In the UK the initial projects involved NHS Trust, prisons and defence facilities while, in Ireland, the main emphasis is on toll roads, educational projects, public trans[1401] port and in the water supply, water treatment and waste management sectors. The initial PPP projects announced in 1999 included three roads and the operation of the light rail system in Dublin and projects in the environmental and educational sectors. The estimated total capital expenditure of the pilot projects is 760 million. It was intended that those projects would blaze a trail for subsequent projects. It is not a matter of waiting for these projects to be completed but to learn from them as they proceed.

The aim of the central PPP unit is to ensure the speedy development of the pilot projects to a marketable stage. At mid-2001 all of the pilot projects were on schedule with no significant delays anticipated. In the roads area there were two projects at qualification stage, the Waterford by-pass and a section of the N4 in Galway. A third project, the river crossing in Limerick, is due to reach the market again this year. A further eight PPP roads projects, to follow the three pilot projects previously launched, were announced at mid-year by the National Roads Authority. Altogether the estimated investment of the 11 roads projects is 1.3 billion, with a potential private finance input of 889 million. It shows the importance of public private partnerships. The cost of 1.3 billion to the Exchequer would be quite difficult to sustain, but the public private income coming on stream makes those projects feasible.

With the launch of the private projects by the Minister for Education and Science, public private partnerships in Ireland moved from a concept to reality. Guidelines on modern contracts and sectoral and overall levels are being developed. It is now up to the private sector to demonstrate its innovation skills to match this commitment to deliver the infrastructure priorities and to show that the public private partnership approach will provide value for money for the Exchequer and for the benefit of the country.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  I am not very impressed by the Government's general approach to this, if only because this Bill was published on 12 June and we are concluding Second Stage on 14 December. It does not seem that this Bill is very high up on the Government's priority list. Perhaps that is a cavil.

I am not as enthusiastic about some aspects of public private projects as the Government seems to be. Although this may be the natural ebb and flow of politics, I seem to remember that the principal Government party was not very keen about this when in Opposition, but it seems to have got religion about it now. It is always useful to remind people about the actuality of the PPP projects we have seen so far. The East Link and West Link bridges, for example, are regularly offered as examples of public private co-operation, which they are. However, to the best of my knowledge, about one quarter of the capital required for the East Link bridge was provided by the private sector. It might have been a similar proportion for [1402] the West Link bridge. In return for providing that amount of the initial capital, the private sector got the franchise to collect the tolls for 30 years. That is a sobering thought. We should always remind ourselves that the private sector is not in business for the good of its or the Exchequer's health. It is in business to make money and it will participate in projects of this kind when the conditions are right for it to make money.

By and large, particularly when the State is in reasonable fiscal health, which we still are despite the best efforts of the Government to squander it, public authorities and particularly the Exchequer will always be able to borrow more cheaply than the private sector. It was interesting to hear Deputy Michael Ahern give what I presume is the official Government line on this issue. When one strips away the fancy language attached to public private projects, what is involved is a balance of considerations of speed against considerations of cost. If it is done correctly, the projects are selected on the basis of the benefit they will be to not just national income but also to national welfare generally. We operate a comparison between the speed discount rate and the cost discount rate and often we will conclude that it is worthwhile to pay a little more to have a project done more quickly than to wait for the point at which it can be inserted into the overall national funding programme if it were to be 100% financed by State authorities.

However, that means there are limits to the areas where it is worthwhile to consider this. Some of the proportions are rather interesting. Deputy Michael Ahern, who sounded as if he were speaking from a Department of Finance script, mentioned eight road projects which are being contemplated, in addition to the three that have been identified. If I heard his figures correctly, he said the total cost of the eight projects would be 1.8 billion. They are now included in the NDP because the private sector will produce approximately 0.8 billion and the cost breakdown is 1 billion from the public sector and 0.8 billion from the private sector. The Government has obviously concluded that there is a gain in welfare from paying a little more for that 0.8 billion to get those projects included in a period of the plan when it is open to the Exchequer to spend 1 billion, rather than waiting for the period when the Exchequer can afford to spend 1.8 billion. That may well be a legitimate conclusion but it is not self evident.

Some experiences should give us pause. In the UK, the procedure was more akin to off balance sheet financing than the type of thing the Government here has in mind, which is a positive point in favour of what this Government is doing. The UK started with prisons and defence facilities. I believe the UK authorities are discovering, certainly as far as the provision of defence facilities is concerned, that they might have made the wrong choice. For example, they contracted out virtually all training for their air force to the [1403] private sector. They have also contracted out all the search and rescue facilities to the private sector and a great deal of the training for their ground forces. They now find that when they get involved in situations such as the Gulf War and Afghanistan, the private sector cannot react as quickly to the needs of a war situation as the public sector can. There are, therefore, some areas where there are serious doubts.

I am not saying we will experience the same problem because I hope we will not get involved in situations where that type of comparison arises.

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  They are looking closely at moving away from PFI to what we are doing.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  However, I have to belie myself immediately by saying the contracting out to the private sector of helicopter search and rescue services in this country has provided us with a better service more quickly than if it had been provided only by the Defence Forces. I am critical of what has been done because we should have used the window of opportunity that was given to us, by the availability of a private sector service, to develop the capacity of the Air Corps to do that. That has been a mistake and I hope it will soon be remedied.

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  We are doing that anyway.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  Different types of arrangements are being contemplated under the Bill and they are set out in section 3(1). There is a quirk in the wording of the section which is rather interesting and which the Minister might explain. Section 3(1)(a)(i) speaks of the design, construction and operation of an asset “and the provision of finance, if required”, subsection (1)(a)(ii) refers to the construction of an asset with the provision of services relating to it “and the provision of finance, if required” while subsection (1)(a)(iii) refers to design and construction together with the provision of finance without the phrase “if required”. Subsection (1)(a)(iv) refers to the provision of services, which never requires finance. Why is the qualification “if required” included in the first two subparagraphs and not in the third?

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  We are trying to give the certainty of a legal basis for projects that exist and for local authorities because there is no legislation in place for many of these things. We want to provide certainty.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  That is a good explanation. Section 4 deals with the various functions of the partners and of the State authority. Section 4(3) states: “The conferral of a function of a Minister of the Government on a partner by a public private partnership arrangement shall not affect the Minister's responsibility to Dáil Éireann or as a member of the Government for the performance of the function”. That is a wise provision. It [1404] means the House can question the relevant Minister on the performance of those functions.

The current arrangement with the National Roads Authority is unsatisfactory. It is not the only area where these arrangements are unsatisfactory. In this politically correct handing over of political functions to appointed bodies, important areas of operation, for which Ministers are operationally responsible in the sense that they allocate the money, are areas about which Members of the House cannot question them. It is not possible for a Member of the House to hold the Minister for the Environment and Local Government to account for anything the National Roads Authority does because of how the NRA was set up. It is not possible to ask the Minister to explain decisions of the National Roads Authority. That is bad. That fault is not in this Bill but it is in the legislative base we have given to the NRA.

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  The Dáil committees have had the NRA before them.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  The Dáil committee can ask the NRA polite questions but the NRA does not have to account for itself to the committee. That is a little off-putting. In some of the cases where public private partnerships are proposed for roads, and where tolls are proposed, reading between the lines of what the NRA say, I find that the NRA feel the idea of tolling has been imposed upon it by the Government. The NRA is being obliged to produce tolling schemes about which it is not convinced.

I am not surprised at that because the NRA is given a very technical function, which is to design and build roads. It is not particularly interested in having political frills put on to that function. In this country's situation, tolling is more of a nuisance than an advantage. Stretches of Irish road are not long enough to make tolling worthwhile, and the time savings possible are not long enough to be able to externalise the costs and to make motorists pay. We will have a series of little tolls that will be more of a nuisance than an advantage, and which will vitiate many of the advantages of building motorways in the way we propose.

I have seen little imagination applied in dealing with the problems the tolls will present, for example, for the people of Kilcock, which is not in my constituency, Enfield, which almost is in my constituency, and Kinnegad. Other difficulties of that kind will come up. We do not have long enough distances of motorway without junctions to make tolls work in the same way that they do on the Italian autostrada and French autoroutes. I have travelled many miles and kilometres on those roads.

I am interested in the Schedule of the Bill. It mentions the agencies and State authorities empowered by this Bill to enter into public [1405] private partnerships. They include local authorities, the Commissioners of Public Works, the NRA, a health board established under the Health Act, 1970, and the Eastern Regional Health Authority. What kind of services does the Minister see the health boards and the ERHA involving themselves in? Will we see public private projects applied to health? What kind of projects will they be? The case for public private partnership is less obvious in that area than in areas such as roads, if only because roads do not change as quickly as hospitals and health facilities. It has been a feature of medicine across Europe that almost by the time a hospital is built – from concept to design to construction – there are changes in technology that need to be provided for. Those projects need a more hands on approach from the public authorities than is got from public private partnerships.

By contrast, an area where the Government has been too timorous in dealing with this is that of waste management. That is because, until recently, in spite of the evidence suggesting we should take a different view, the Government has left too much of the decision-making process to local authorities. We do not have waste separation facilities and waste recycling facilities on the scale that we should. We do not have thermal treatment facilities or incineration, or whatever euphemism is now used to describe that process, and this is because the Government has left this to the local authorities. Local authorities have, by and large, given in to the kind of nonsensical pressure against the provision of all these facilities.

People always say they are not against recycling or waste separation but that they do not want a unit in their town. They say they are against incineration before meeting politicians – I have had this experience recently – to tell them they have come across a great scheme which separates out waste, sorts it, takes out the heavy metals and organic material, puts the rest of the material together, and produces an inert block that can be used to power electricity generating stations.

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  Combined heat and power.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  Exactly. Combined heat and power. When I tell such people that this scheme is incineration by another name they are astonished. They hold a politically correct view that incineration means that everything that is produced, including heavy metals, is put into a big furnace leading to dioxins spewing out all over the countryside. That the Government has left this entire matter to local authorities has meant that it has been vulnerable to that kind of mistaken analysis The result is that, instead of having a rational waste management policy, we have a situation where the Minister for the Environment and Local Government must visit the unlicensed toxic dumps that are continually being discovered.

[1406] Public private partnerships in the area of waste management could work. We have them in a half-hearted way in the operation of landfills. There are a number of privately operated landfills around the country that seem to get on reasonably well with public authorities, although who knows what happens between the point of origin of the waste and the time it arrives at a landfill. Public private partnerships could work well in the area of waste management and that could give us a better mix of waste management policies than we have at present. It requires the Government and the Minister for the Environment and Local Government to make decisions.

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  The intention is to do what the Deputy has said.

Mr. Dukes: Information on Alan M. Dukes  Zoom on Alan M. Dukes  I am delighted to hear it. I wish the Minister for the Environment and Local Government would get on with it. This issue has been sticking out a mile for a long time. We need a firm hand taken.

Another area where public private partnerships are held out as the way of the future is in the provision of light rail transport in Dublin. I am afraid this will get PPPs a bad name because, so far, the Government has been unable to decide on the structure on which to run the partnership. The Luas line could be up and running if the Government had not allowed the best, in terms of PPPs, to get in the way of the good in terms of the structure that was there in 2000.

I have one final gripe to make about the Bill. Section 7 provides for the Minister for Finance, following consultation with an appropriate Minister, to make orders amending the Schedule, that is, amending the kind of public bodies that may involve themselves in these PPPs. That order – surprise, surprise – takes the passive form by saying that the order shall not be made if a resolution disapproving of the draft was passed by either House within the next subsequent 21 days.

That is the kind of order that Governments bring in which they know they will never have to defend, because the House can deal with an order like that only if the Government orders it for debate. That is anti-democratic and anti-participation, and I am disappointed once more to find that, in an area like this, where we are not dealing with the detail of the operation of the Bill but dealing in a real sense with where the action happens, the Government has chosen to come forward with this form of passive order. I invite the Minister to return on Committee Stage to make a more rational provision for an order which requires that the orders be debated in the House, and that they get an affirmative vote before they come into operation.

Mr. Finucane: Information on Michael Finucane  Zoom on Michael Finucane  I wish to share my time with Deputy Bradford.

I welcome this Bill. We all recognise there has been an economic downturn not only in Ireland but internationally. The sequence of events in [1407] regard to the 11 September incident will create difficulties for us in developing the economic infrastructure required by this country under the national development plan.

The national development plan for infrastructure will not be sustainable unless there is an increase in the public private partnerships. We have taken steps in that direction recently. I saw an announcement recently in regard to five schools in different locations around the country. The State is entering into a contract with an English private company for 25 years after which they will revert back to the State. The State will make a payment on a yearly basis. I hope we will see more of that happening. I am concerned about the capital building programme for schools, which I assume will be announced in the near future, and the focus on the unsatisfactory condition of many primary schools in particular. Unless we see something imaginative, the existing facilities will remain and children will continue to be educated in a most unsatisfactory educational environment.

I have seen improvements over the past few years, as we all have, in the standard of our national primary routes in particular. Under the national development plan, it is hoped to develop this even faster. Limerick County Council has a very effective road design office which caters for the mid-west region. The mid-west region has seen quite a lot of development of high quality roads recently. However, those travelling to Kerry and passing through the main highway from Limerick to Newcastle West and on to Killarney would like to see even more improvements. A by-pass for Adare, Newcastlewest and Abbeyfeale has been in the pipeline for a number of years.

Because of an economic downturn and a shortage of finance, none of us would like to see that type of development being held up and the advances we have made over the past few years being stifled. The public private partnership is a very good concept and this legislation, which underpins it, is of vital importance because we will not achieve what we want to achieve unless we have something imaginative such as this.

There has to be something in a public private partnership for private industry. The incentive in the case of roads and tunnels is the probability that a fee will be paid. Many of us have experience of travelling on the one toll section of the motorway in Dublin and people have accepted that they must pay a fee. It was developed exclusively by a private company. I noted recently that there will be a public private partnership development in that area which is extremely important because all of us see the gridlock that has developed along that main arterial route to the airport. Any development to alleviate that should be encouraged.

We will probably have a debate on this issue in Limerick, although probably not for a few years. Earmarked for Limerick is the Shannon port tun[1408] nel. Anyone crossing from Limerick to Clare will see the congestion on the three existing bridges. We develop radial roads yet we face a bottleneck when entering and crossing the city. The Shannon port tunnel will ease that congestion and will take about 30,000 motorists off those bridges and into the new tunnel. It will be a very important part of the development of that area, especially with Shannon which is very important to the economic hinterland that surrounds the Shannon area. We look forward to that development which could end up as a public private partnership. We await the debate which will inevitably ensue as to whether there should be tolling or shadow tolling. It is estimated that this project will cost at least £75 million. Because it is a tunnel, it will cost about 7% more than a bridge. It is, however, considered essential given the vitality of Limerick Port with up to 200 ships per year. It is not feasible to build a bridge and a tunnel is the most logical option, although it will be a lot more expensive.

We have seen many exciting developments. One area, however, which continues to be ignored is the N69 route. It is a pet project of mine because it stretches from Limerick to Foynes. The industrial hub of our area happens to be along the Shannon Estuary which is often described as the jewel of the western world. There is potential for further development at that location. The main barrier to those developments is the condition of the N69. It is regarded as a national secondary route. I hope the National Roads Authority, which received a comprehensive submission from Limerick County Council on what is required, will carry out the type of development warranted. Heavy trucks using a road, whether a secondary or a national primary route, demand proper road conditions to which they are entitled. The problems these heavy trucks create for our existing road structure make it inevitable that we will have to consider improvements in that area.

I welcome the section of the Bill which states that one can enter into joint partnerships with local authorities. Possibly that concept has not been developed enough up to now. Those of us who live in rural areas are aware of the difficulties faced by small communities by a lack of sewerage facilities. When it comes to the capital programme, only a trickle of those projects are granted permission each year because of the cost. Unless there are new imaginative proposals to provide the type of sewerage structure required, many of these rural communities will die. In recent years, we have seen tremendous improvements which have made many of these communities more vibrant. We have seen modern roads, stone walls and nice landscaping works but quite often the heart of these communities has gone.

Unless the local authorities, the Government and all concerned look at this issue differently, many of these rural communities will not survive. It is possible that a public private partnership could be a company or a group of individuals in [1409] a community who will pay a lot more for the provision of a service but what is important is that it improves the situation. In many cases, people would lend themselves to giving a contribution because it costs about £3,500 to put in one of these bio-cycle systems. If people got together with the local authority, it might be feasible to do something.

Mr. Bradford: Information on Paul Bradford  Zoom on Paul Bradford  I thank my colleague Deputy Finucane. He can now avail of the pairing I had offered him. He can go about his business.

I am grateful to have the opportunity to comment briefly on a few issues that are relevant to my constituency and others. I readily support the overall thrust of the Bill, namely to try to put in place a firm structure for public private partnership agreements. I am glad we have moved away from the politics of pure ideology. Any system we can implement or schemes we can put in place that will help secure economic progress and social advancement should be supported by the House. With that in mind, there is great scope for public private partnership agreements. The public and private sectors, working together, can ensure a better future for the country.

Mr. McDowell: Information on Derek McDowell  Zoom on Derek McDowell  Having said that—

Mr. Bradford: Information on Paul Bradford  Zoom on Paul Bradford  Having said that, we have to be careful in respect of giving a carte blanche. One aspect that worries me, because it impacts upon my constituency, relates to the present road building programme, in particular the tolling schemes that are being proposed. I am sure Deputies Dukes and Finucane mentioned them as well. Arising from a number of debates we have had in this House and a number of questions which the Taoiseach has answered, we still appear to be absolutely unclear about the position on tolling schemes.

In my constituency, there is a proposed tolling scheme for the bypass of the town of Fermoy. It is quite extraordinary that there is a proposal to put a toll on a town bypass. It goes against all shades of opinion on bypasses, including engineering opinion. When we tried to make representations on the matter, we met the National Roads Authority. We were given a nice cup of tea but told we were in the wrong place and that we should have been speaking to the Government or the Minister. When we raised the matter in the House we were told it could not be raised here because it is a matter for the National Roads Authority. We have been unable to ascertain who took the decision to put in place a tolling scheme for the Fermoy bypass. I am sure that query relates to many bypasses and projects throughout the country.

Regardless of who is responsible, I question the economics and value for money afforded to the taxpayer in respect of such schemes. From the figures being made available by the National Roads Authority, it appears the tolling of some of these bypasses, in particular, is giving a blank cheque [1410] to developers. I am aware that certain people in the Department of Finance are concerned about this and have indicated that many of these projects could be done perhaps as quickly and efficiently by the Department by borrowing and making money available to the local authorities. We should examine this before handing a blank cheque to developers. That is one side of the argument.

The other aspect, which is more a matter for the Department of the Environment and Local Government and the National Roads Authority, concerns putting a tolling plaza on a town bypass. I have no difficulty with the tolling of a major motorway route, but in my constituency in the town of Fermoy we have been looking for a bypass for 15 years. Now that it is to be provided, we have come up with the not very bright idea of putting a tolling plaza on it. One does not need to be an Einstein to recognise that much of the traffic we have spent years trying to divert out of the town will now come back into the town to avoid the tolling plaza. It makes very little economic or social sense.

With regard to local authority involvement in public private partnerships, I heard Deputy Dukes speak of waste management. I readily agree with him. That we do not have a national waste management authority means we have 26 different plans rather that one national plan. I continue to be amazed at our failure to do anything meaningful in terms of recycling or waste reduction. The last two or three budgets provided no incentive to promote recycling or waste reduction.

Recycling is a loss-making operation. Recycling operators cannot make a profit. If we attempted to put in place certain financial incentives – a tax package – to make recycling viable, private funding could be introduced to assist local authorities. Those of us involved with local authorities have to recognise that every local authority is now facing a waste management crisis. The debate focuses on landfills in some counties, incinerators in others and different forms of technologies in other local authorities.

Nothing is being done to reduce the amount of waste being created. Very little is being done to build material recovery facilities. There is a role for the Government in putting in place tax incentives to make these urgently required facilities feasible. Such incentives would make it possible to have private money invested. I hope we make progress in this respect. It is required urgently.

Affordable housing, which is a good concept, is not taking off to any meaningful degree. In my local authority of north Cork, we currently have 25 or 35 houses being made available under the affordable housing scheme. We should be able to sit down with people in the construction industry and devise a reasonable public private partnership that would give a reasonable return to the investor and bring affordable housing on stream. This sounds like a good concept but, at present, the affordable housing stock exists only in legis[1411] lation. It does not exist in practice in most local authorities. At a time when the housing problem is very grave and when there is a downturn in the building industry, we should work hard to put an attractive system in place. There is scope, by way of public private partnership, to make affordable housing work.

I welcome the concept in the legislation. We should not rush into public private partnerships without reflecting on the various schemes being proposed. I welcome involvement in terms of housing, waste management and road development. I find it extraordinary that road projects take so long in this country. I am very concerned about the proposal to toll town bypasses. If we have to have a substantial return to the investor, we should consider shadow tolling, which works quite effectively in Britain and many European centres. I do not like to see bypasses that were built to take traffic away from town centres being tolled, resulting in traffic coming back through the town centres. I hope the Minister will reflect on that and advise us on the responsibility of the National Roads Authority or the Department of the Environment and Local Government in making those calls.

An Leas-Cheann Comhairle: Information on Rory O'Hanlon  Zoom on Rory O'Hanlon  There are just five minutes remaining before I call on the Minister. I call on Deputy Roche but I understand the Minister is prepared to allow Deputy Durkan five minutes in view of the season that is in it.

Mr. Roche: Information on Dick Roche  Zoom on Dick Roche  I will take less than five minutes to facilitate Deputy Durkan and the Minister. I welcome the idea of public private partnerships for a number of reasons. We have never been ideologically committed to an idea that the State or local authorities should have a monopoly of public works. One of the great successes in Ireland has been the rather pragmatic approach that we have adopted from day one, going back to the 1920s, about State or semi-State enterprise. This is a new step in the same direction.

Public private partnerships could be particularly successful in a number of areas. I agree with Deputy Bradford's points. The affordable housing scheme is an area which should be vigorously examined in this regard. We have a situation in Wicklow where the local authority has a number of successful affordable housing schemes in operation but there are not enough, particularly in the towns surrounding Dublin city and county. The scheme should be accelerated and a PPP would put off the opportunity to do so. The hysteria beginning to grow about PPPs and the roads area is not properly focused. If we allow that hysteria to cloud reality we will end up with a situation, as we have on many previous occasions, which prevents us from making the progress we need to make.

I agree that there will have to be a serious examination of small town by-passes and shadow tolling. As Deputy Bradford said, the idea of [1412] building toll booths on a small by-pass does not make sense. There has been huge road development in France particularly, in which the small section of road which surrounds a city is left either toll free or with shadow tolling. That will have to be the situation here also. Another speaker referred to our small land mass, saying tolling raises fundamental questions. Shadow tolling may be the answer.

I disagree with some speakers on waste management. Coming from Wicklow, I am familiar with the privations of the private sector in this regard, particularly when it is left to its own devices. I suggest we enter this particular area very carefully. The recent dumping problem in Wicklow, which is now an epidemic, is caused by private Dublin operators, some of them very large operators. I will not name them but looking at one of them recently I was alarmed to find the company had remarkably few assets. When the gardaí, the Criminal Assets Bureau and other State authorities move in on this “operator”, there will be very little to be seized. When the Litter Act comes into operation and £10 million fines and prison sentences are handed out, I fear that some amadán who has allowed his land to be used will suffer rather than the real culprits.

Deputy Dukes made the point that in waste management we should look at incineration, recycling and an enclosed cycle. I draw the attention of the House to the PPP model operated in Denmark in this regard which is very interesting. Small municipalities there tend to own combined heat and power plants, usually built outside cities, which are involved in recycling, material recovery and converting waste to heat. It is a fully integrated process and has been supported by budgetary measures, which means there is a tax yield for recycling. It is a complex process but we could examine it with a view to addressing the issue of waste management and converting waste to heat. This would solve some problems in my constituency which have been all too evident in recent months. I draw the line at the absolute privatisation of waste collection services. I have seen its future and that future does not work.

Mr. Durkan: Information on Bernard Durkan  Zoom on Bernard Durkan  Like other speakers, I have mixed views on public private partnerships. The concept is good but the public, those who invest, are entitled to a fair share of the action afterwards. Deputy Dukes mentioned the M50. I have watched that bridge for some years and the toll started at 70p, then went to £1, to £1.50 and £3 for trucks and so forth. A toll of that nature is a licence to print money, particularly if interest rates drop. Obviously there are swings and roundabouts according to the contract but it is a licence to print money. When that concept is extended throughout the country that will be fine but we should not forget something: land acquisition by order is fine for public utilities but whether one has a large or small input from the private sector, the outcome should be to the [1413] benefit of the consumer in the long run. If not, we will have problems.

The problem of waste management must be addressed. Everyone says everything can be recycled but that cannot be done and we will never be able to do so. There is no sense in having this as a soft option in the hope that it will work out some day. It will not work out and we will have to provide appropriate facilities.

I am familiar with land acquisition for roads and motorways, which is necessary and must be done. However, I do not understand why local roads, which facilitate the people of the area, cannot be left alone. New roads can go over or under those local roads but I cannot understand stopping existing roads in the middle of nowhere to create a cul de sac in order to cut costs for those designing the new road. Surely it is simple to work out a formula whereby existing roads are left alone and those travelling them all their lives are allowed to use them in the normal way. That should be an essential ingredient in the whole question of land acquisition throughout the country. It would also get the co-operation of those whose property is encroached upon.

If I am around next Christmas maybe I will continue.

Mr. Roche: Information on Dick Roche  Zoom on Dick Roche  I am sure the Deputy will be.

Minister of State at the Department of Finance (Mr. Cullen): Information on Martin Cullen  Zoom on Martin Cullen  And on the same benches.

Mr. Durkan: Information on Bernard Durkan  Zoom on Bernard Durkan  Not with any luck.

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  I thank Members for their contributions. I hope that the level of interest shown in the provisions of this legislation is matched by the level of PPP projects entered into by State authorities throughout the country. I am encouraged by how well informed the contributions have been and I hope it has proved informative for those who are following the debate outside of this House.

Since the publication of this Bill some months ago, the Minister for Finance has received a number of representations in relation to its provisions. These contacts have come from Members and from a range of interests in both the public and private sectors. I am pleased that most of these have been both positive and constructive. The Government is in agreement with certain suggestions made in relation to the Bill, some of which have been raised here on Second Stage. Accordingly, as a result of representations received, together with the need to make technical amendments to the Bill, the Government will be submitting a number of amendments on Committee Stage.

Deputy Dukes referred to the delay in introducing the Second Stage debate. We have had a huge raft of important legislation before the House and I am glad this Bill has passed Second Stage. Deputies Finucane, Dukes, Bradford and McDowell raised the question of tolling. In the [1414] first instance, statutory responsibility in this area rests with the National Roads Authority under the Roads Act, 1993. The NRA has overall responsibility for the planning and supervision of construction and maintenance of national roads. Specifically in relation to tolls, section 57 of the Roads Act, 1993, as amended by the Planning and Development Act, 2000, allows the NRA to establish a system of tolls in respect of the use of a public road. The NRA may also enter into a PPP to procure a public road and toll charges may be used to repay all or part of the private funding involved.

The key principles for selecting PPP schemes for road projects are an alternative route must be available, an Exchequer contribution will be available for high cost schemes to ensure that tolls are set at affordable levels, tolled roads will be spread throughout the network and tolled roads must deliver value for money. It is worth noting that there are tolls on more than one third of the 50,000 kilometres of motorway in Europe. Ireland, Spain, Portugal and Greece benefit from the EU Cohesion Fund, the objective of which is to strengthen economic and social cohesion in EU member states. All the Cohesion Fund countries have embarked on a major programme of road investment, a key element of which is PPP schemes financed by user tolling.

Shadow tolling is not part of the National Roads Authority's pilot PPP project for roads. In the United Kingdom and Portugal, some PPP roads projects have incorporated shadow toll schemes broadly along the lines suggested by Deputy McGrath. The experience of other countries suggests that shadow tolling can be very costly for the Exchequer. The polluter pays principle is absent in shadow tolling. On this issue, as with many others which arise under public private partnership, we will continue to learn from the pilot project process as individual projects are rolled out.

Deputy Bradford raised the matter of the Fermoy road and asked specifically about the bypass. I have summarised the benefits of tolling and they can be applied to the Fermoy scheme. Approaches that include tolling can assist the financing of road projects, are consistent with the polluter pays principle and help to incentivise delivery and quality maintenance over the full 25-year concession.

Deputies McGrath and McDowell referred to the question of land, particularly farmland, compulsorily acquired for roads and other infrastructure projects.

Mr. McDowell: Information on Derek McDowell  Zoom on Derek McDowell  From slightly different angles, it must be said,

Mr. Cullen: Information on Martin Cullen  Zoom on Martin Cullen  I will explain the matter. The question of compensatory payments for farmland compulsorily acquired arises irrespective of the method of procurement. The issue is not exclusive to the PPP process and cannot be resolved in the context of this Bill alone, although there is [1415] merit in many of the remarks that have been made. The House is probably aware that a final agreement has recently been proposed following lengthy discussions, aimed at resolving the issues surrounding access to farmland for the national roads programme. The proposed agreement is before the IFA and the National Roads Authority. I look forward to its adoption by both sides in the House so that progress on the important programme of improvements to the roads network can continue without further delay.

I understand Deputy McGrath's concerns in relation to the importance of proceeding without avoidable delay with priority roads projects under the national roads programme. An aggressive schedule was set for the delivery of such projects when the PPP pilot roads projects were selected and I am glad the NRA is generally keeping to this schedule. The N4 route between Kilcock and Kinnegad and the Waterford bridge project are at tender stage and bids are due in February 2002. It is important to note that the projects must undergo the appropriate statutory planning processes.

Deputy McGrath also asked about road safety standards in the PPP roads projects and I can offer the House some assurance in that matter. Survey results show that motorways and dual carriageways, which will be delivered under PPP roads projects, are significantly safer than conventional single carriageway roads. PPP incentives should ensure the concessionaire maintains the road quality at a higher level than has been the case with conventional procurement.

Deputy McDowell raised some union issues, including the pay and conditions of employees. I have already mentioned the part that partnership has played in the development of the PPP process. The participation of, and consensus reached with, the social partners has facilitated the development of the PPP process and has ensured that the issues raised by Deputy McDowell have been addressed. The framework for public private partnerships, to which I have referred, includes a specific provision for consultation with stakeholders. It states that all parties to a PPP arrangement should have regard to appropriate industry norms in terms of pay and conditions and prevailing national and industry agreements, including health and safety regulations. The framework provides that such an approach should be consistent with protections provided under the Transfer of Undertakings (Protection of Employees) Regulations and the acquired rights directive. In general, PPPs should be approached on the basis that no less favourable terms than the transfer of undertakings regulations apply.

I understand and appreciate the concerns expressed in relation to pensions. It is a complex and highly technical matter which requires comprehensive examination to address the various issues involved. While I agree that action is required, it is not appropriate to take such action [1416] in the Bill before the House. The Bill's function is to establish the vires of State authorities to enter into PPP arrangements, not to deal with the rights of individual employees of the authorities. I repeat that partnership is at the heart of the PPP process and it has played a vital role in reaching consensus on issues on which agreement was not thought possible. Discussions have taken place with the social partners on the question of pensions and contact will continue in an effort to achieve a mutually acceptable resolution. The Government is conscious of the absolute need to preserve the pension rights of employees transferring from the public service.

I acknowledge Deputy McDowell's concerns that the PPP message has not been communicated sufficiently throughout the trade union movement. I am pleased to inform the House that the central PPP unit of the Department of Finance, in conjunction with IBEC, ICTU and the CIF, is undertaking an extensive campaign aimed at raising awareness and increasing communications. This communications strategy is being rolled out on a regional basis over the coming months and I look forward to the fullest participation throughout the regions. I was pleased to be in Cork earlier this week to speak at the launch the first of a series of nationwide PPP information seminars. Speeches were also made by a senior official from my Department and by representatives of IBEC, ICTU and the CIF. It was a harmonious event, which enlightened all present and I look forward to further seminars.

I welcome Deputy McDowell's support of the principle of PPPs and I agree with him that it is essential to establish a value for money benefit to the Exchequer from PPPs. It is true that development of the private finance initiative in the United Kingdom was motivated by different objectives, but I suggest that, in some respects, the UK is moving closer to the PPP model being developed here in Ireland. Hindsight is a wonderful thing and Ireland has learnt from the experience of private finance initiatives in the UK and other countries. We have used the experience to build a better PPP process in this country. A critical element of the process in Ireland is the commitment of Government. Solid Government support for PPPs has helped us to make good progress at the highest level. This support is grounded in a clear appreciation of the economic case for individual PPPs and a focus on deliverables, based on a requirement for a sound business case evaluation.

As I have said several times, partnership is a key element of the success of public private partnership in Ireland. We will not stand still as the PPP process develops. The structures for delivering PPPs are crucially important and the Government has taken care, in developing the process in conjunction with the social partners, to put in place a workable framework within which the process can be delivered. The PPP framework requires a comprehensive and regular review of the overall process together with continuous [1417] monitoring of its implementation. As I mentioned on the first day of this debate, the coming together of public services and private business is not new. We have not traditionally relied on monopolies for the provision of essential public services, such as health and State education, as they have been funded and provided through a mix of central and local government and private, voluntary and community based organisations. Many local authority services have been provided through contract arrangements with the private sector. PPPs are consistent with these long-standing practices.

The Office of Public Works has extensive experience of PPP projects, having designed, constructed or maintained many public buildings, including Garda stations, prisons and Government offices. The Office of Public Works' recent experiences with arts, culture and heritage projects mean it can bring a wealth of experience to the new method of public procurement represented by PPP.

Deputy Dukes mentioned the financial cost of PPPs and it is true the Government can borrow at lower interest rates. That is only part of the story, however, as there are advantages other than accelerated delivery, which was mentioned by the Deputy. Better value for money can be found through the allocation of risk to parties best able to manage it. Full life cycle costs can be brought below conventional project levels and room can be made for private sector innovation and expertise by linking design and construction to finance and the long-term operation of the project.

Environmental, health and waste management issues have been suggested by Deputies as suitable for public private partnerships. I welcome such contributions and I respond to them by confirming that the Government has an open mind regarding the wide range of approaches that can be taken. We are learning from the experience of other projects, so that we would not, for example, approach the West Link Bridge project in the same manner if the deal was to be done again. I commend the Bill to the House.

Question put and agreed to.


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