Eoin Ó Broin (Dublin Mid West, Sinn Fein) | Oireachtas source

Rebuilding Ireland has a commitment to provide 50,000 social houses over the next six years. As we have been saying for some time on this side of the Chamber, a significant portion of those are not real social houses at all. Up to 30% of that 50,000 will be delivered through PPPs or various forms of leasing from the private sector, the most recent of which is a kind of PPP on steroids. The problem is that, just as the rest of the world is actually walking away from the use of PPPs in the delivery of social and affordable housing, we have, for the first time in the history of this State, a Government embracing it with gusto.

It is not my opinion that these do not represent value for money or a good way to deliver social and affordable housing. Much more eminent and mainstream organisations than Sinn Féin or other Opposition parties are on public record as saying this is a bad way to proceed. The European Court of Auditors published a detailed report in March this year, specifying right across the European Union the failure of PPPs to deliver quality infrastructure and value for money. The European Services Strategy Unit has done a detailed paper, particularly focusing on PPP failures in housing provision. We have had the House of Commons Treasury Select Committee, no bastion of radical political action, arguing strongly against the use of PPPs in regeneration and social housing projects. Even our own Comptroller and Auditor General has highlighted problems with PPPs. I urge the Minister of State to consider some of these points, notwithstanding the superficial presentation he made at the start, because he ignores the real concerns many of these organisations and some of us on the Opposition Benches have.

The first thing that has to happen with a PPP for social and affordable housing is this mysterious exercise called the public sector benchmark. It involves a small group of civil servants going into a room to calculate what it would cost the public sector to do a particular project over a set period, ranging from how to finance, build, maintain and manage the tenancy of a social house over 25 years. That is then locked away in secret. There is no scrutiny from politicians in local or central government or in Parliament. Tenders are then requested. If the private sector comes in at or below that public sector benchmark, then it has an opportunity to secure the contract. At no stage is there any proper public scrutiny of how those figures were established. With respect to the PPPs for social housing, we do not see what the public service benchmark exercise is until after the tenders are awarded. There is no transparency, no accountability or no mechanism to ensure the interests of the taxpayer, let alone tenants in social housing, are adequately protected.

That raises real questions about value for money. The idea that PPPs represent better value for money than standard State investment or borrowing simply does not add up. In addition to the standard costs to build a house, to maintain it and to manage the tenant, one also has to factor in the profit premium for the PPP consortium over 25 years of the arrangement, plus one has to factor in an additional cushion of risk in case things change. We know for example that the maintenance of buildings of any kind, particularly public housing, is expensive with changes in technology, price of materials, labour etc. One just does not have a profit margin but an additional cushion of risk which the taxpayer ends up paying for. Even on the most basic analysis, assuming nothing goes wrong, we already know they are going to be 7% to 10% to 15% more expensive over the lifetime of the project than if the State were to do the exact same job itself.

The second issue is the contracts. This is not just a simple tendering contract one would have with a builder to provide social housing. These are incredibly complex contractual arrangements. It takes an enormous amount of time for public officials in the Department of Housing, Planning and Local Government and the local authorities to negotiate these. They are filled with all sorts of additional risks. The most recent study of PPPs in Britain for social housing and regeneration has shown that additional costs will be incurred when the PPP consortium identifies additional costs halfway through the project after five, ten or 15 years, and then threatens to withdraw from the project if additional funds are not provided. In some cases, the local authorities said they were not providing them. Accordingly, the PPP consortium withdrew and the Treasury had to pick up the tab. In other cases, the local authorities paid the extra money. This idea that the PPPs work because they transfer risk on to consortia simply is not borne out by the history of the projects.

There is also the issue of timescales. When he was Minister for Housing, Planning and Local Government, the Tánaiste, Deputy Coveney, announced 1,500 PPP social houses were to be delivered in three tranches of 500.

What we are hearing today from officials in local authorities in the five areas where these houses are to be delivered is that not only is it taking longer to negotiate these contracts but that the private sector may not actually be interested because the deal is not strong enough in terms of profitability. This has led the Government to find new ways to offer incentives to the private sector, something I will return to later. Not only is it more expensive, and has greater risks, but it takes significantly longer. On the basis of this first tranche, it may be adding an additional 12 months onto the three years it already takes to deliver a social housing project in this State.

As someone who wants to see social housing being delivered and who has voted for planning permissions for local authorities that unfortunately will be funded by public private partnerships, if the Government does not listen to the advice from this side of the House, it simply makes no sense. That is not an ideological argument, it is based on evidence provided by a range of eminent bodies.

I mentioned that the first tranche of public private partnership is experiencing some difficulties. I have heard that private sector investors do not think there is a sufficient level of profit, notwithstanding the additional cost to taxpayers, so what has the Department of Housing, Planning and Local Government done? It has gone back to the drawing board and asked investors, in particular real estate investment trusts and other so-called tax efficient vehicles, such as Irish collective asset management vehicles, ICAVs, to go away and design a new scheme. It came back with a wonderful entity called the enhanced leasing scheme. Not only will it have the disadvantage of the public private partnership, additional premiums and risks, but there will be a greater level of payment to the consortium over the 25 years. Unlike PPPs, which are bad enough, at the end of that 25 years, the State will not even own the asset. It will pay over the odds for social housing for 25 years and at the end of that period, the so-called tax efficient vehicles, the REITs or the ICAVs can sell it on and, because of the way they are structured regarding tax, they will pay no capital gains tax and will not even have to pay dividend withholding tax to many of their investors.

In some ways, the debate around public private partnerships and social housing has moved on to this much worse funding mechanism, the enhanced leasing scheme. However, the most sensible way to do this, the way it was done in the 1950s and the 1970s when the State built more houses than at any time in its history, is to fund local authorities directly, either through Exchequer revenue or through low interest borrowing by the State or the Housing Finance Agency, to build the units directly. It is crucial to ensure there is sufficient revenue, some of which can come from affordable rental or cost rental to the social housing stock alongside traditional differential rent, to ensure that there is proper maintenance.

We are at a time when mainstream and now even right-wing economists are telling us that public private partnerships do not work. Colm McCarthy, who many on this side of the House would have long regarded as a bogeyman of right-wing economics, has argued publicly that they do not represent value for taxpayers money, that the State does not get to control the asset to the same extent as if there was direct State, central or local government involvement. They produce poor quality housing stock with poor systems of management in a way that is bad for tenants, communities and taxpayers. I do not hold much hope that he will do so. However, I urge the Minister of State not to listen to myself, Deputies Boyd Barrett and O'Reilly or others who spoke, but to read the European Court of Auditors report from April 2018. Read the reports from the House of Commons or the Comptroller and Auditor General, particularly with respect to housing, which is the area I know more than others, and try to understand that this is a bad way to fund 30% of housing output from now until 2021. Abandon those plans and start to allow local authorities and approved housing bodies access to the funding they need because otherwise we will return in five, six or 12 months when projects have collapsed, as they are doing in the school sector, or in ten or 15 years when we are dealing with poorly run social housing estates, managed by the private construction sector, or worse again in 25 years when the State has paid above the odds for these units and they have been sold on into the private sector and tenants have to be rehoused in real public housing, as we have warned.

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