Dáil debates

Tuesday, 4 October 2005

Report of Comptroller and Auditor General: Motion.

 

7:00 pm

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)

Revenue has made significant investments in regard to its computer systems by integrating relevant contracts tax into its main computer systems. This allows for the better monitoring of compliance behaviour of principal contractors and for Revenue to more effectively police the operation of the C2 certificate of authorisation system.

Turning to the issue of better management of public expenditure, I wish to remind the House about the important measures which have been taken by the Government in the recent past, at the initiative of my Department, notably in the area of capital expenditure. The Government is acutely conscious that we must get optimal return for the significant levels of capital investment to which we are committed. Currently, we are spending close to 5% of GNP on capital investment funded by central Government. This is around twice the European average and it will amount to over €36 billion in the period 2005-2009.

The Government accepts it has a clear duty to promote a framework that will deliver value for money for this investment. In doing so the Government is resolved to learn from past inadequacies in some instances, including any highlighted by the Comptroller and Auditor General. It is my strong contention as set out in the Government motion that we have been proactive in this regard and that the fruits of this action are already visible. In budget 2004 my predecessor Charlie McCreevy introduced major reform of the system of allocating capital investment resources. Five-year funding plans for each ministerial area were agreed. Provision was made, for the first time, to allow for carrying over to the next year unspent allocations up to a maximum of 10% of these capital provisions. The objective of the new system is to introduce relative medium-term financial certainty for Ministers and implementing agencies so they can better plan and execute their capital programmes. This is particularly important given the scale and timeframe of many of our modem infrastructural projects. The carry-over system allows agencies to move away from the tendency to rush end-year expenditure, as was the case under the old system.

The multi-annual framework is underpinned by requirements designed to ensure that the substantial financial commitments in the envelopes are complemented by a commitment by Departments and agencies to implement all the guidance laid down by the Department of Finance regarding the appraisal, procurement and management of capital projects. In essence, the new system is promoting better management of capital expenditure. It provides relative financial certainty and underpins best practice in the management of programmes and projects. The response to the new system has been uniformly positive.

Earlier this year I announced revised guidelines for the appraisal and management of capital expenditure proposals in the public sector. These are testimony to the Government's commitment to maximising value for money from capital expenditure. They complement the multi-annual capital envelope system.

The new guidelines are designed to encourage a better approach to appraisal and management of capital programmes and projects and to reflect best practice. Key features of the new guidelines are that all projects over €50 million must undergo a full cost-benefit analysis and all capital programmes with an annual value in excess of €50 million and of five years duration, or more, will, for the first time, be required to be evaluated over the course of each five-year cycle.

Those who state that another layer of ex ante approval may be necessary before capital projects proceed should acquaint themselves with the guidelines. The new capital appraisal guidelines contain all that is necessary to assist proper costing, appraisal and efficient execution of projects. For example, they explicitly state, in reference to the appraisal process, that "the cost of the project should be the expected outturn cost, including construction costs, property acquisition, risk and contingency" and that "the cost of possible future price increases and variations in project outputs should be factored into the calculation of project costs".

On public procurement, the Government has announced measures designed to ensure that there will be a much closer alignment between the agreed tender price and the final outturn cost of construction projects. We want to achieve much greater cost certainty in construction projects generally. To achieve this outcome, the Government has decided to introduce changes in the operation of public sector construction contracts. We intend, following consultation with the industry, that public sector construction projects will be tendered competitively on the basis of a fixed-price lump sum contract in which appropriate construction risks are identified and transferred to contractors. Under this system, the amount of variation or "extras" will be limited to the greatest extent possible. There will be a higher up-front capital cost with greater certainty for the Government as client and the contractor as provider. The final outturn cost will be much closer to the contract terms.

We are also modernising the system for employing consultants, including engineers and architects, for example, to decouple professional fees from project costs. The existing system, which sees consultant costs increasing as project costs increase, is not the way we want to do business in future. We are proposing a new system which will involve movement away from the practice of paying consultants a percentage fee based on the final cost of a project in favour of requiring professionals to tender for fees on a fixed lump sum basis. Competitive fee bidding is being introduced in a way that should not compromise design quality.

The construction industry is being consulted about the way these changes will be implemented. It is high time best practice followed in the private sector is implemented in the public sector also. I am satisfied that both the Government side and the contracting side will benefit from the certainty introduced under the targeted arrangements.

We are already seeing evidence of significant improvement in management of capital projects. In the key transport area, for example, major projects are now coming in on or below budget and on or ahead of schedule. The Monasterevin, Cashel, Ashford-Rathnew and Ballincollig bypasses comprise some more recent examples. In this regard, the relevant yardstick for measuring cost overruns on capital projects is the contract price and not the original pre-tender estimate that may have been drawn up many years previously and that may bear no relation to the specification of the project tendered for or completed.

On expenditure Estimates, I agree in principle with the proposition that there should be more accountability in this House for outputs achieved for the financial inputs approved by the House. I am in consultation with my Government colleagues on that matter. The objective will be to facilitate early examination by the House and its relevant committees of the macro-economic and fiscal background to budget policy formation and promote a more informed debate on the various Estimates for each Department.

Since 1997, the Government's economic policies have greatly increased employment and prosperity. The resources generated by this prosperity have been applied in a way that has benefited all sectors of society. In the area of transport, there was virtually zero Exchequer capital investment in public transport in 1997. We have invested a cumulative €2.3 billion since then and this has led to major increases in capacity, especially in the greater Dublin area. These include the introduction of the Luas which has a capacity of 20 million passengers per annum and a major expansion of the DART. We have halted the neglect of our railway network generally by increasing capacity and making our railways safer. Further improvements are under way and much more will be done in the years ahead.

In the health service, since 1997 total discharges for 2004 in the inpatient and day care categories have increased by more than one third; the number of day care treatments has doubled; the number of consultant posts has increased by almost 50%; there has been a 145% increase in the number of occupational therapists; there has been a 75% increase in speech and language therapists; and the number of physiotherapists has almost doubled. These large increases in medical personnel are delivering more treatment across a whole range of areas. Nobody should suggest the work these personnel do represents a waste of resources.

There have been improvements in services at all levels, including education, since 1997. The pupil-teacher ratio has fallen from 22.7:1 to 17.4:1 at first level and from 16:1 to 13.6:1 at second level. There are 7,000 more teachers employed. There are almost 6,000 special needs assistants, which number rose from a base of virtually zero when the Government took office. The number of students taking up third level education has risen from 95,000 to almost 140,000. There has been a massive increase in capital investment in our schools and colleges. It has more than quadrupled, from €120 million to almost €540 million this year. Just last week, the Minister for Education and Science and I announced a major new round of PPP investments in 22 first level and second level schools. Having listened to Deputy Shortall, I am interested to hear about the policy formation process that exists between the Labour Party and Fine Gael.

I could refer to other services such as social welfare, services for the disabled, housing and many more in respect of which there have been major service improvements. Any objective overview would conclude that, since 1997, the Government has presided over the greatest ever advance in the quality of our public services while reducing the burden of personal income tax, and dramatically reducing debt levels.

The Government has a good record of achievement in delivering results. We are resolutely committed to value for money. As I have outlined, we have put in place a robust framework for appraising and delivering capital programmes and projects that will reduce the risks. I intend to ensure, as Minister for Finance, that we will continue to manage the economy in a way that delivers increased prosperity for all our citizens, that allows increased resources to be used for improved public infrastructure and that allows for improved social services aimed at addressing the needs of both the less fortunate in our society and those of the ordinary citizen.

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