Mick Wallace (Wexford, Independent) | Oireachtas source

The 2012 Fine Gael and Labour stimulus plan spent €2.25 billion on capital projects, predominantly based on the use of public private partnerships. It was announced at a time when the use of PPP contracts was on the wane worldwide. That same year, the UK Treasury was in the process of reviewing its PPP system because as the Treasury review put it, there was "widespread concern that the public sector has not been getting value for money and taxpayers have not been getting a fair deal now and over the longer-term". There was an apparent lack of analysis of the history of PPPs in Ireland at the time. The only extensive review had been carried by the Comptroller and Auditor General in 2004. That body had complained that a lack of transparency and limited access to essential documents, coupled with the short timeframe allowed for the report, had hindered the possibility of making a properly informed decision about the value of PPPs.

Prior to the Fine Gael-Labour stimulus plan, there was a substantial record of abandoned and delayed projects between 2009 and 2012, some 24 cases in all. In 2012, the Comptroller and Auditor General showed that the cost already incurred on cancelled projects amounted to €229.2 million, showing that PPPs have huge liability issues attached to them. The Comptroller and Auditor General also recommended that the Government publish its evaluations of the value for money expected to be achieved through PPPs, but strangely this never happened. All we get is outlandish figures for job creation that are never verified after the fact. One has to wonder if there was a solid rationale for the effectiveness of a PPP-dominated stimulus package at all.

In-depth studies that get to the crux of the issue have been conducted elsewhere. An extensive review of the use of PPPs and private finance initiatives, PFIs, in Northern Ireland over the course of ten years published by the Centre for International Public Health Policy in the University of Edinburgh found that:

Private finance creates a public debt. The public bodies involved in PPPs have to pay annual payments to the private sector over a long period, often 30 years.

The review also concluded:

The “additionality” of private finance is illusory – an accounting anomaly which distorts financing decisions. Similarly, the notion that PPP can help to rebalance the economy is a misconception. This is a policy that will channel work to large, overseas companies at the expense of domestic providers, curtailing private sector growth... The evidence demonstrates that finance costs are higher for the private sector, and this, combined with an excessive rate of return on capital, has led to very high costs for the public authorities involved in contracts.

Aside from the liability issues, the lack of transparency, the lack of incentive to provide value for money and the recent disaster of the collapse of Carillion, there is a serious question about the role of the State in appointing these firms. As I mentioned in the Dáil in January, the past ten years saw Carillion's profits continuously decline while its debt level skyrocketed. According to a British parliamentary paper published in January, it ran up debts and sold assets worth £217 million to continue paying dividends to shareholders between 2012 and 2016. How in God's name Fine Gael and Labour thought that this firm was fit for purpose to build a range of schools in Ireland is beyond me.

The group paid out dividends of £376 million over the five-year period, but it generated just £159 million of net cash from operations. Apparently we paid no attention to this. On top of all that, from late 2015 onwards, it became the subject of a financial bet by hedge funds to the effect that it would collapse. Around a quarter of all its shares have been lent to speculators since that time, which begs the obvious question. If everybody in the market knew Carillion was in trouble, why did the Government go on handing the firm lucrative contracts?

Public private partnerships are non-existent in 13 of the 28 EU member states. Some of these countries have the highest levels of public capital spending, and yet Ireland has the fourth highest level of engagement with PPPs and the fifth lowest public capital spend. That is a figure that has to be looked at. It is mad. The notion that PPPs are necessary or that we would spend less on capital investment without them is pure fabrication. Although we know that there is no proof that PPPs provide value for money, the whole notion of value for money is the wrong way to think about these services, since the cheapest option is very seldom the best one, as my experience in the construction industry brought home to me.

Last January, the Minister for Education and Skills, Deputy Richard Bruton, told the House during a Topical Issue debate: "A key advantage of the public private partnership model is that the construction and funding risk is transferred to the private partner." He should tell that to the subcontractors. I am sure someone from the Minister of State's constituency is contacting him about this. Despite the legislation that was brought in a few years ago, the subcontractors are unprotected. A subcontractor by the name of Philip O'Grady in Wexford is owed more than €80,000 by Sammon. Sammon has gone under because it was working for Carillion. It has now gone into examinership. The Revenue Commissioners expects payment from Mr. O'Grady at the moment. Where is he supposed to get the money if Sammon does not pay him? The banks will not give it to him. If the State had a direct role in the construction work, he would get paid.

In the same debate in January the Minister for Education and Skills said "we have six buildings close to completion and in State ownership, for which no payments have been made, other than for off-site works". If the State has not paid this absolute fabrication of a business called Carillion, is money available to pay the subcontractors? It would be very interesting to know that. Deputy Boyd Barrett mentioned Mr. Niall Reynolds in Meath. He contacted me this morning as well. It is a sad story. He says that people in his position seem to be nobody's business and are left to wait for a pittance from the examiner after all their hard and honest work.

The Construction Contracts Act 2013 must be revisited. I will tell the House something we do an awful lot in this country.

We legislate but we do not follow up on it. We have rules and regulations which are not implemented, imposed or monitored. Section 19 of the Criminal Justice Act 2011 provides that a person who becomes aware of corruption is obliged to inform An Garda Síochána. However, the National Asset Management Agency does not do so because it could not care less about the Act. According to the law, companies are obliged to report wrongdoing to the Garda. At the same time, it is grand if they do not do so because at most they will receive a slap on the wrist. NAMA has not even been given a slap on the wrist.

The same applies in the case of the Construction Contracts Act 2013. This legislation was intended to protect subcontractors but does not do so because it is not enforced. To take the example of a subcontractor whose contract states he must be paid within 60 days of doing work, if the contractor has not paid after 100 days and the subcontractor says he needs the money because his company is small, the contractor may say he will pay within a month because he is also stuck. What is the subcontractor supposed to do in that scenario? Should he refuse to do any further work until he is paid? If his company was strong enough, he probably would refuse to do further work but most subcontractors are not in that position. This means they will keep working, which sometimes results in them digging a deeper hole, as was the case with most of the subcontractors who worked for Sammon.

The number of subcontractors complaining about the fallout from Carillion is horrific. Joe Gabbett, a steel fabricator from Wexford town, is owed €180,000 by Sammon for steelwork he did in a number of the company's buildings. Sammon was working for Carillion. What will happen If Mr. Gabbett does not certify the steelwork he did? The law provides that no one will be able to move into a school unless the work is certified. This is creating serious problems. At the end of January, when Deputy Clare Daly and I spoke on a Topical Issue debate on this matter, the impression given was that the issue would be sorted out within weeks. I stated at the time that there was not a prayer that it would be solved in a few weeks because these problems are extremely complicated. In fairness to Mr. Gabbett, he stated his company will survive because it is strong. However, he also described the lack of protection for subcontractors as bordering on criminal and said the Construction Contracts Act was not worth toilet paper because it was not being implemented.

Subcontractors are being hung out to dry. I walk along Molesworth Street on my way to the Italian quarter twice a day. I am repeatedly stopped by subcontractors who are working on new offices on the street being built with investment money from US companies and vulture funds. They ask me to do something to protect subcontractors and ensure small Irish companies are treated fairly. Subcontractors have been left out on limb because of the closure of Carillion and the subsequent collapse of Sammon. Subcontractors are not normally paid in such circumstances. The Government must examine this issue because it is a major problem for small businesses employing Irish people.

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