John Paul Phelan (Fine Gael)

I understood the Minister of State's meaning. As a member of Fine Gael and as a private individual, I am in broad agreement with the pursuit of public private partnerships to engage private money to complete much-needed public sector infrastructural projects. Fine Gael considers public private partnerships to have the potential to provide value for money to the State and on-time infrastructural projects to the country. While the Minister of State outlined a number of projects in his statement, Fine Gael's lack of confidence is in the transparency of the decision-making process and the potential for cosiness in the evaluation of the merits of public private partnerships on a case-by-case basis.

The Minister of State referred specifically to examples of public private partnerships in the education sector. The grouped schools project was a pilot public private partnership involving the construction and operation of five large schools, the contract for which was won by Jarvis. As the Minister of State said, the Comptroller and Auditor General reported on the project. He found that while the Department estimated the partnership would result in a saving to the State of around 6% over the traditional approach, it is likely the final deal with Jarvis will cost between 8% and 13% more than a conventional procurement operation. I found the Minister of State's response to the Comptroller and Auditor General's statement wishy washy to say the least. Given the significant overrun in place of what traditional methods would have delivered, the Minister of State's response is simply not good enough. Public private partnerships were supposed to represent the watchword for value for money in infrastructural delivery. The idea that a project adopting the partnership approach would cost 13% more than traditional methods is not what was sold to the Houses of the Oireachtas when this approach was first discussed.

The Minister of State also referred to the construction through a public private partnership of the Cork School of Music, the contract for which was also awarded to Jarvis. It has now been brought to people's attention that Jarvis is experiencing financial difficulties resulting in considerable concern about the delivery of the accommodation for the school. Can the Minister of State refer to the matter in his closing remarks? The public private partnership experience in the education sector is nothing to be very excited about.

The Minister of State also referred to ten national roads projects being implemented on a public private partnership basis. These are the Kilcock-Kinnegad motorway, the Dundalk western bypass, the Fermoy bypass, the second Westlink bridge, the N25 Waterford city bypass, the N3 Clonee-Kells scheme, phase 2 of the Limerick southern ring road the M50 upgrade scheme, the N6 Oranmore-Ballinasloe scheme and the Portlaoise-Cullahill-Castletown sections of the N7 and N8.

I am concerned at the notion of placing tolls on town bypasses. One can make a case for bypassing a completely new section of motorway which links two urban areas but the placing of a toll on a town bypass could defeat the purpose if people use the existing road structure through the town rather than the new bypass. The example I would use is the developing Waterford bypass where in the city of Waterford there is only one river crossing. While traffic is heavy at critical times during the day, the new bypass involves the construction of a second bridge further down stream. The original idea was that many from my area in south Kilkenny who work in Waterford city and travel to the industrial estates on the Cork side of the city would use the new bypass to access work. If they have to pay €3 or €4 each time to cross the new bridge I can see many using the existing road structure. It is fair enough to take those travelling from Rosslare to Cork out of the city centre and that will be a good thing. The second benefit of the proposed second river crossing will be nullified if a large toll is placed on that bridge.

We all agree that the road projects outlined are vitally important and that they need to succeed for the future economic development of the country. There are undoubtedly circumstances where a project under PPP can achieve a more market and custom orientated management of revenue combined with a more efficient design, build and operate project, harbours being a good example. However, we must be careful in the selection of such projects. The National Development Finance Agency Act offers no public policy guidelines to the proposed agency as to how these selections should be made. Projects that might superficially appear to be good candidates for PPPs may not be so. Commercial pricing will not always provide the optimal use of an asset. I mentioned town bypasses as a good example. Unless the bypass is constrained by capacity, pricing of its use will divert users back into the town centre and sacrifice the gains the project was supposed to achieve.

Pricing is a matter that is important to public policy. Low off-peak pricing may be attractive from a public policy point of view but not from a commercial operator's point of view. We must be careful as to whether the risk is genuinely being transferred to the private sector or whether the State remains the risk bearer of last resort. This is a crucial issue, which the Minister of State did not address.

If the State allows part of the money to fund a prison or a hospital, the private financier may demand control over the asset and its revenue. However, if the project fails, the private operator may well decide that the optimal course of action is to close down the operation. We are all familiar with the current situation in hospitals. It would not be acceptable if the Government were to stand over a position where a hospital or a prison built under such a scheme was allowed close. In the last analysis the Government will be the risk taker of last resort and will have to step in to undertake an expensive buy-out of the private interests.

Good public policy means one does not have to shore up the funding of a project with the implied lean on the assets for the private sector with the management of different elements of the project where there may well be private sector efficiencies to be achieved. There is the option of using management contracts for areas where private sector efficiency can be achieved. It is not clear that the new agency is to be given either the remit or the expertise to make these sophisticated project by project choices. Generally, in the public sector the problem has been poor efficiency in design, building and operation. Any or all of these elements can be contracted out. It is important that the Minister of State at the Department of Finance can give a full evaluation of the experience with public private partnerships to date.

Another issue of concern is that of charges. The Government, as we pointed out in Private Members' business on Wednesday last, in its two years has implemented 31 or 32 stealth charges, by relying on PPPs, about which I have no ideological hang-up. We must be careful that we do not simply unburden the State and shift the burden on to the service user.

Road tolls are becoming more common and while they do the job they can pose a difficulty for those who rely on them, especially those on modest incomes. It is not possible to know if this is borne in mind when the decision to run with the PPP is made because we are in the dark on the criteria used. Our call for greater transparency is not an end in itself; it seeks to ensure that criteria such as this are taken into account.

Two years ago in the Dáil, Deputy Richard Bruton, the Fine Gael spokesperson on finance, asked the former Minister for Finance, during a debate on the National Development Finance Agency Bill, a number of questions on this particular area that were not answered. I hope the Minister of State will be able to shed some light on them in his closing remarks today. Does the Minister of State believe that the school projects built by the PPP have offered good value for money and is the Department happy to stand over the figures we have seen from the Comptroller and Auditor General? What premium was deemed worth paying for the risk transfer? What are the value for money tests applied by Departments? Are potential private investors justified in complaining that the value for money hurdles are not made sufficiently clear to them to make it worth their while competing? Will the National Development Finance Agency bypass the value for money tests being applied, not least by the Department of Finance? Is there a strong flow of good projects for public private partnerships and, if not, why not?

On the question of whether enough private investment is being attracted to fund schemes designated as PPPs, clearly the answer is "No". For the first time in living memory a Minister for Finance cannot present a full Book of Estimates because he said he needs to find alternative revenue streams to fund infrastructural projects that did not attract sufficient investment. To put it bluntly the Government is losing it in the whole are of public private partnerships. Such is its lack of control. I urge the Minister of State to clear up the outstanding issues in the questions raised two years ago, which were legitimate at the time. They were not answered then but the answers are badly needed now.