Joan Burton (Dublin West, Labour) | Oireachtas source

With regard to public private partnerships, over recent months I have asked a number of detailed questions in respect of each Department, particularly the Departments of Finance and Public Expenditure and Reform, to identify what Departments have public private partnerships, their value and what they are for. The answers are very interesting. What is even more interesting is that in recent times the two major providers of public private partnerships in certain areas, such as education, have been the two big UK and global public private partnership companies, Carillion and Capita, one of which has now gone into a very difficult and costly liquidation, and we read this week that for the past couple of months the second company, Capita, has been enduring increasing financial difficulties. It would be fair to say that at present the jury is out as to whether Capita will now go the way of Carillion.

The collapse of both public private partnership providers and companies has led to the loss of tens of thousands of jobs in the UK and Ireland. In particular in Ireland, we have the loss of a range of jobs. Some very good and reliable contractors who were subcontractors on public private partnerships face receivership before the courts with a lot of difficult efforts being made to save companies that have a long and quite good construction record. The collapse of Carillion and the subsequent difficulties with Capita - some companies are affected by the fact that both of these companies are in difficulty - have come like a bolt out of the blue for such companies.

What is more, and we know this with regard to the schools bundle, the Minister for Education and Skills was quite blasé in answering me on this when he suggested, when the collapse of Carillion first happened and then with the difficulties with Capita, that all would be well quite quickly. The commentary over and over again was there would be no difficulty and no loss to the Irish Exchequer and that the NTMA was not on the hook for any of the losses. In fact, although many of these projects are practically completed and the schools are expected to be in possession of the new buildings, we are still not clear as to when exactly completion will happen. Obviously, we then have the complications of the running and maintenance contracts for up to 25 years after completion. It is not clear who will actually take them over.

The theory behind public private partners is very simple. For large-scale projects, particularly roads and airports, additional funding can be obtained. The funding can be kept off the State's balance sheet in terms of total borrowing. Perhaps efficiencies can be gained, in terms of the type of people involved in the public private partnership, and the project will be managed for 25 years and then handed back to the State.

That is the theory. When this model of financial development was being developed from the 1990s onwards, to be honest, it seemed like the answer to the prayers of a hard-pressed Minister for Finance, whereby without enhancing the national debt, one could get a large amount of available capital and build some significant and substantial projects. However, it has not worked out like that. The theory that the PPP was going to result in a significant part of a capital project being transferred from a risk point of view in whole or in part to the private sector, thereby lowering the State's risk profile on its debt, has turned out to be a chimera for a simple reason. If one builds a hospital like the one in Limerick, and this has happened all over the UK, via a PPP and the PPP developer and the PPP company running the hospital thereafter collapse like Carillion or get into difficulty like Capita, what Minister would say he or she will wash his or her hands of it and that the hospital should close? As that would not be possible, the notion that we are transferring risk in a competent way from the public to the private sector is simply not true. Similarly, if we build a public road or railroad and the PPP collapses, one cannot close the road. One must continue with the road but must get somebody else to take on the completion of the project and the running and maintenance of the road. Again, if one builds a primary or secondary school as part of a bundle, can anybody show me an example anywhere in the world where an existing school under the management of a PPP that collapsed was subsequently closed down by either local or national government? I do not believe there are such examples because the kind of projects about which we are talking pertain to public goods which, once built, are for the public in any particular country or region and we are not going to be able to close those public goods that the public has provided for. There is a conceptual flaw with regard to PPPs.

The second point about PPPs is that they save money in some cases by very sharp practices relating to how they reduce costs. They can reduce costs by eliminating pension liabilities from their wages bill or a conscious use of subcontractors who, while registered for tax, are self-employed, in particular for PRSI purposes. The consequences are that what would normally be the employer's contribution to the employees' long-term social retirement pension from the public welfare system of the welfare state is done away with. We have about 30 years experience of PPPs and we know that they promise a lot if they are perfectly executed but in many historical examples, they have not been perfectly executed and have come back to the door of the State to be taken over by the State and have become much more expensive. In addition, there are a lot of financial, technical and legal costs associated with PPPs that can be extremely high. Consequently, while the rate of interest we see on a PPP appears to be very low, it is nowhere near as low as the rate of interest at which the State is able to borrow.

The reason the IMF came in to Ireland was because our banks could no longer borrow. If that situation continued, the banks would have closed down. In the aftermath of the collapse and the disastrous bank guarantee, PPPs were probably one of the few mechanisms still available to Ireland to allow it to borrow money and, critically, not increase the national debt but have it off balance sheet. Thankfully, those days are over. They have been over for about five years because the State can now borrow at significantly cheaper rates. While I can understand that for many officials, the PPP has a tidiness about it that appears to answer pages of tick-box questions that are asked about projects, those answers are very often illusory. We know this very specifically and not just in the case of the UK, which has had such examples for probably ten to 15 years with regard to, for example, NHS trusts in different parts of England which have become completely embroiled in debt brought on by a PPP regime they simply cannot finance with payback.

Will the Minister agree to a serious independent evaluation of PPPs around the world, in particular the many examples of those that have failed, so that if he is looking at these again, he has these failures very clear in his mind? I hope the Minister of State will stand up to say that he will carry out the evaluation because it is necessary.

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