Joan Burton (Dublin West, Labour)

Has the Minister engaged in a reassessment of PPPs? One of the aspects regarding PPPs is that they are meant to transfer risk from the State to the private sector. This was fine when interest rates were low. In light of the international credit crunch, however, interest rates for private sector investment have risen dramatically. Some time ago, the former Comptroller and Auditor General, when he examined a number of school building projects that were carried out under the PPP process, pointed out that the cost of capital relating to PPPs is significantly higher than would be the case if the State borrowed such capital and commissioned projects through the traditional direct procurement method. Now that interest rates relating to the private sector are so much higher, what is the justification for engaging in so many PPPs?

What is the position as regards risk? There have been a number of reports to the effect that in the Irish case very little risk is transferred to private developers. Did the Minister feel sorry regarding what happened in the case of Dublin City Council and the private developer, Mr. Bernard McNamara, who walked away from five PPP projects in Dublin city? Thousands of people were depending on these projects proceeding in order that they might obtain new homes. The preferred bidder walked away, presumably on the basis that, in light of the current economic climate, he could no longer make money out of these projects. What is the Minister's view on this matter, particularly in light of the fact that Mr. McNamara is the preferred bidder in respect of the construction of a prison at Thornton Hall? In the latter instance, the State will be the guaranteed customer and there will, as a result, be no risk to the private provider. It walked away from the five PPPs in Dublin city but is the preferred bidder for a prison at Thornton Hall, where the State is the guaranteed customer, and there is therefore no risk to the private provider. The State, with current interest rates, may now end up spending much more on the cost of this PPP.

The Minister should be concerned about mortgaging future generations at a very high price when using the PPP procurement method unless risk is clearly transferred and the PPP provider produces the item at a much cheaper cost. I do not understand how this can happen with interest rates at an astronomical level.

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