Martin Mansergh (Fianna Fail)

I welcome the Minister of State to the House and welcome this debate. In a general sense it could be said the entire economy is a public private partnership. There are very few private sector activities that do not receive State or EU support in some shape or form. Equally there are few State sector activities that do not involve a fair degree of interaction and co-operation with the private sector. I do not have an ideological preconception either that the private sector is inherently more efficient than the public sector or vice versa and, of course, both are equally capable of being highly inefficient.

I wish to put on record the commitments made both politically and by the social partners to the whole concept of public private partnerships. For example, the Fianna Fáil manifesto issued before the 2002 election stated that Fianna Fáil would:

Encourage PPPs where this can speed up investment, increase competition and keep down prices to the benefit of the public; where it will result in greater efficiency in the delivery of services; and where it can draw on expertise and manpower resources from home and abroad not currently available in sufficient strength.

With the help of our PD partners, this translated into An Agreed Programme for Governmentwhich stated: "We believe that new methods of financing major capital requirements are required." Reference was made to the need to maximise efficiency, delivery, value for money and appropriate risk transfer. The Government has also made reference to opening up new opportunities for private companies to invest in public infrastructure through PPP projects.

Sustaining Progress 2003-2005 also had a chapter on this subject and made reference to comprehensive framework negotiations between the Government and the social partners in terms of the provision of detailed guidance to the State in this area. In addition, the National Development Finance Agency was given an advisory and potentially financial role. In last year's budget, the Minister announced a five-year envelope and stated that public investment undertaken by the private sector would rise from 3% of total spending in 2004 to 15% by 2008. The actual figures were €150 million, plus another €150 million pertaining to PPPs funded by user charges — this essentially pertains to roads. The total was to rise to over €1 billion. Targets of €150 million for 2004 and €300 million for each year up to 2008 have been set aside for PPP projects to be financed by user charges. The areas identified were the OPW, justice, environment and local government, education, public transport and arts, sport and tourism.

There is no doubt about the Government's commitment or the social partnership commitment to the process. The necessary statutory framework has been established, as has a social partnership framework. As we know, there is a relevant unit in the Department of Finance. The framework exists but it is a question of how the process will work in practice.

The primary purpose of PPPs is to assist and accelerate infrastructural investment. In the House last week I stated that the IMF regards Ireland's major economic priority in the next few years as improving its infrastructure, not only roads and transport, but also its educational and social infrastructure.

There is one consideration that does not apply in this country to the same extent as it does in others where this model has been developed. We may have been watching very closely what happened in the UK, whose borrowing is close to the ceiling established in the Maastricht guidelines. PPPs are not needed to solve the problem of how one invests in infrastructure without breaking the Maastricht guidelines. We are operating so comfortably within those guidelines that this is not the primary consideration, especially not since EUROSTAT changed, within the past year, the rules as to how one accounts for PPP projects. Previously there was an inclination to put all the long term costs into one year's budget, which clearly made the whole process otiose. One must always consider, particularly in a country like ours which has a credit rating near the top of the scale, that the public sector can almost always borrow more cheaply than the private sector. In a sense, there must be compensating virtues.

Having spoken to colleagues in Government, I have sensed that there is a certain frustration over the fact that developments are not proceeding faster. This was reflected in the Minister of State's speech. Reading between the lines, one noted that the target for PPP take-up would not be met in this financial year. On the other hand, if we go headlong in all directions without considering matters critically, we will risk having, or will have, many more reports by the Comptroller and Auditor General criticising the costs we incur. I support the notion that we need to proceed carefully if the process is to retain credibility.

Let me touch on two or three of the areas that have been chosen for PPPs. One such area is transport, as referred to by Senator John Phelan. I thought immediately of the Drogheda town bypass, but this is way outside Drogheda, and I therefore suspect the Senator was not referring to it. Being pragmatic, I feel that the benefits of tolls on long stretches of road far outweigh the costs, and therefore I do not have a difficulty with them.

I have many more reservations about phenomena such as the Westlink toll bridge. It is in a city area and we only have to listen to AA Roadwatch every morning to know that there are queues on the approach road. If, with a magic wand, one were to remove this toll bridge or have an electronic tolling process, congestion might simply occur at some other point and the net effect might not be very different. Given the volume of traffic at the Westlink toll bridge, I hope the State is getting a reasonable take therefrom. It must be a great cash cow. I hope the moneys collected are not going entirely into private pockets.

The M7 and M8 were mentioned, as was the proposed bypass between Portlaoise and Cullahill. There is a problem regarding the connection of the M7 and M8. I am a little concerned that the National Roads Authority is lopping off bits and pieces of projects in order to get its budget to stretch further. It has done so in Cashel, to which there are no links coming from the south. I was made aware of this and went as part of a deputation to the Minister for Transport. The northern links converge at a central intersection. The southern links were in the original plans and were removed. I gather this is also happening at the point where the M7 and M8 join. The point could be made that nothing can be done about this now and that one would hold everything up but we will incur greater costs than those originally envisaged if one were to re-include the links in the plans. However, given that we are not under considerable financial constraints, the National Roads Authority should be discouraged from cutting corners on projects such as those I have mentioned.

Schools have been mentioned. A report was issued in the past year on the PFI in Britain in a supplement to Private Eye. Unfortunately the report was not dated but it has some relevance to school projects here. An audit commission report on 17 PFI projects for local authority schools was issued in the past year or so. The same firm, Jarvis, was involved in five projects here. The commission found that in every single project there was no improvement on the traditional method of procurement. In some cases the traditional method would have been preferable. The schools were not cheaper, the contracts were not completed any quicker and there was no transfer of risk.

I am not attacking PPPs, but I am underlining why there should be a certain degree of caution. We are in a learning process, therefore, we will not always do everything right in the beginning. One can learn from experience. There is no doubt that, like ten years ago, financiers were hoping there would be a massive programme of privatisation. Companies thought loose money was available from the Exchequer on easy risk-free terms for an assurance that projects would be delivered. Later, when someone else was in office it would be discovered, on counting the cost and on the question of accountability and so on that a bad deal had been made.

I am not trying to attack the PPP process, but I am underlining why it is necessary, while trying to push ahead, to have a degree of caution in order to ensure the State gets value for money. Given the significant increase in wealth and Exchequer resources in the late 1990s, there was perhaps a temptation across all sections of political opinion that, regardless of whether the method used was straightforward public procurement or PPP, we could throw money at the problem because there was plenty more from where it came. The new Minister wants to emphasise that, even though we are anxious to get things done, we must get value for money in order to justify to taxpayers how the money is spent. I have no doubt that involving the private sector can result in more efficiency, quicker delivery and so on, but it cannot be taken as axiomatic. One must examine the details and proposals in each case. There must also be competitive tendering to produce the best results.

There needs to be a balanced approach to this issue. We must accept that it is a positive innovative addition to the means of providing infrastructure compared with what we had in the past. We must also realise that there are dangers and pitfalls which must be avoided. I support the Government's commitment to PPP while also supporting the degree of caution being applied by the Department of Finance as guardians of the taxpayers.