Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome the opportunity to contribute to this debate on PPPs. Like my colleague, Deputy Cowen, it is my view that PPPs have a role to play. Obviously, there needs to be a detailed and forensic financial assessment of the most viable procurement option. What option gives the best value for money? In my view, direct capital expenditure is the preferable option in the vast majority of cases. It is more straightforward, less complex and can be more easily assessed from a financial perspective. However, there are projects where private sector expertise is invaluable. PPPs afford an opportunity for risk sharing, which is important. From an accounting and budgetary point of view, PPPs can potentially afford greater scope for investment in the economy, which is something we want to see.

Nobody can say that PPPs are in some way magic money. There are real and significant financial commitments involved which have to be thoroughly assessed. I commend the Parliamentary Budget Office for the paper it has produced. It is of very high quality and gives an excellent overview of the position concerning PPPs in the country. Some of the first major PPPs that took place were in my own constituency in Cork, such as the National Maritime College and the Cork School of Music. They are two projects that our leader, Deputy Micheál Martin, was very much involved in promoting. They are excellent projects that have stood the test of time.

Learning from the experience of the Carillion collapse, there is a need when a PPP is embarked upon to consider contingency planning. Since there is private sector involvement, the reality of life is that things go wrong. Companies go bust and get put into receivership. Banks move against them. There is a need for a very clear contingency plan in respect of that scenario whenever we are entering into a PPP commitment. The relationship can break down between the public and private entities if something goes wrong on the private sector side.

One of the reasons PPPs have a role is the manner in which direct Exchequer capital expenditure is booked in a budgetary context. We are supporters of the fiscal rules and the fiscal compact. Overall, having those rules is a positive development. There is an issue around how capital expenditure is accounted for in respect of the smoothing effect.

If €100 million is spent on capital expenditure one quarter of that amount is booked in year one and another quarter in year two, et cetera, until year four. By comparison, in the private sector capital investments are made. For example, capital allowances on plant and machinery are claimed over an eight year period at 12.5% per annum. Investment in buildings can be claimed over a period of 25 years. It is true to say that capital expenditure is booked over a very short-term in respect of the use of fiscal space under the rules. I believe the Government should be raising this issue with the European Commission, because capital investment is, by its nature, a long-term investment in the future of our country and the future of our economy. The dividend and return for the State will be achieved over a much longer period of time than the four years mentioned. That is an issue that should be dealt with.

I welcome the fact that the 10% rule is being removed and replaced with, in essence, a new methodology whereby public private partnerships, PPPs, will be accounted for quite similarly to direct capital expenditure in the way it is booked against the capital allocation of each individual Department.

I ask the Minister of State to take on board the recommendations of the Parliamentary Budget Office that the Estimates of PPP expenditure would be made available on the PPP website in the context of the multi-annual capital allocations for the period 2018 to 2021, and that a breakdown of major PPP projects in the water sector, along with costs, be included on that website as well. That would be an important step forward.

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