Michael Finucane (Fine Gael)

I welcome the opportunity to discuss the 2005 annual report of the National Development Finance Agency. The agency is now almost four years old. It has stated that one of its principal functions is to advise State authorities on the optimum financing of priority public investment projects by applying commercial standards in evaluating financial risks and costs. Its overriding objective is to maximise value for money to the Exchequer.

These are worthy aims, and no doubt the agency strives to meet them. However, the story of the Celtic tiger has been one of incompetence in delivering capital projects. While the private sector and the economy have roared ahead, that private success has stood in stark contrast to the public waste. We have had some dismal experiences with public private partnerships where both the taxpayer and the user of public services have been left badly bruised. The toll bridges in Dublin are a sore reminder, and the Comptroller and Auditor General found that PPP schools projects were 20% more expensive than expected. The lesson is that one must be careful when choosing to use PPPs.

It is worth pointing out the level of waste over which the Government has presided in capital projects. In November 1999, the Minister for Agriculture and Food received a proposal from Punchestown seeking funding of €6.9 million to build an exhibition and show centre. The Department of Finance approved the full amount, but in June 2000 Punchestown requested an additional €6.4 million, something acceded to by the Minister for Finance. A further €1.48 million was sanctioned for the project by the Minister in 2002, and the total over-run was almost €15 million.

MediaLab Europe was established in May 2000 as a university level research and education centre to specialise in telecommunications, information technology and multimedia technologies. It is worth bearing in mind that it had become a pet project of the Taoiseach after a visit to the Massachusetts Institute of Technology. The State invested €35.5 million in the project which collapsed in early 2005.

In 1995, the Department of Justice began the refurbishment of Cork courthouse. The cost of €6.35 million was to be borne by the Department. However, the final cost reached €26.5 million, with an additional €5.2 million for rent on substitute properties also being borne by the Department.

From 1999 the Office of Public Works acquired several properties to house asylum-seekers, spending €18.9 million on five locations that were never used. The recent Kilkenny flood relief scheme entailed a combination of river widening and deepening, flood walls and drainage works. Originally costed at €13 million, the final cost was almost €50 million. Inadequacies in the initial design plan, post-contract changes, significant under-estimation of costs and failure to negotiate a fixed price contract were causes of the large overrun. Furthermore, the works were extended to three years owing to unforeseen archaeological work required, and there was at the time no risk management approach to flood relief schemes.

Who could forget the so-called Bertie Bowl? To facilitate the construction of the stadium, the Government moved the national laboratories to another location. Clearing the existing site cost €96.5 million and, in addition, the Government spent €3 million developing the Bertie Bowl only to suspend the project.

The citizens of Dublin are lucky enough finally to have their Luas. However, even that was a financial disaster. The original scheme was for a single continuous line from Dundrum to Tallaght through the city centre. It was adopted as Government policy in 1996. The project was costed in 1996 at €279 million, but the final cost was €750 million. Its target completion date was 2000, but it was completed in 2004.

The port tunnel runs from East Wall to Santry, connecting Dublin Port with the M1 motorway. Originally estimated in 1999 to cost €222 million, the contract awarded in 2000 was for €449 million, and the final cost is expected to top €1 billion.

In 2005, the Minister for Justice, Equality and Law Reform purchased a site for a proposed new prison intended to replace Mountjoy Prison and the Central Mental Hospital in Dundrum. The Minister spent €30 million on a 150-acre site, a price estimated by valuers to be more than eight times the going rate for land in the area.

All that is an appalling indictment of Government policy. It is a catalogue of embarrassing incompetence and, worst of all, came against the background of sparkling private success in our economy. Fine Gael and our partners in the Labour Party have spelt out our approach to getting capital projects built on time and within budget. Key to that approach is giving the Taoiseach and Tánaiste a central role in setting a limited number of strategic priorities for the Government. Furthermore, the Taoiseach and Tánaiste will assess ministerial performance against key high level targets.

The Taoiseach and Tánaiste will have a direct role in setting priorities for the Estimates process. They will be assisted by an Estimates strategy group tasked with ensuring that the Estimates reflect strategic priorities. We will enhance the role of the Department of Finance, both as promoter of economic and social development and as monitor of public spending outcomes. The Estimates process will be reformed to provide for a strategic reserve fund. Thus up to 2% of Government spending will be held back each year and allocated to achieve a strategic shift in policy and where demonstrable value for money can be obtained from additional spending. That will also enable the Government to foster reforming measures that enhance value for money.

We will establish a critical infrastructure commission to analyse key infrastructural priorities and monitor progress on major infrastructural programmes for economic, social and regional progress. We will reform and enhance project management by introducing a gateway system for major capital projects to enhance accountability and pin down responsibilities and by introducing a traffic light reporting system for projects to highlight emerging problems.

Those policies are spelt out in the joint Fine Gael and Labour policy document, The Buck Stops Here. Given recent events in the Government, it is a policy clearly not followed by Fianna Fáil or the Progressive Democrats. I note that in July 2005, the role and functions of the National Development Finance Agency were expanded to include a specialised procurement delivery function. The centre of expertise within the agency is for the specialist procurement of public private partnership projects, initially a programme of projects from the Department of Justice, Equality and Law Reform, the Department of Education and Science, and the Department of Health and Children.

At the time, Fine Gael deputy leader and finance spokesman, Deputy Bruton, rightly questioned whether the decision to transfer responsibility for capital projects away from Departments would be a success. The Minister for Finance, Deputy Cowen, obviously wanted to be seen to be doing something. Expanding the role of a quango is an easy option, especially when it removes responsibility from the shoulders of the Minister and his colleagues.

Using private finance is a more expensive way of raising money than traditional Government borrowing. However, savings should arise through superior management of risk by firms used to delivering a better performance in the private sector. The question now arises of whether the higher cost of using private finance will be offset by possible savings in the private sector. The work of the National Development Finance Agency is far from transparent. It will be difficult for the public ever to know whether the projects represent a win for the taxpayer. Like the National Roads Authority, the NDFA is not subject to close scrutiny by the Oireachtas. We are being asked to take a leap of faith.

There are also concerns about conflicts of interests that need to be explored. The NDFA has become the sole gatekeeper for approving PPPs in key sectors. However, it also has the role of organising investments in such projects. It has been given authority to borrow up to €5 billion to do so. It would not be in the public interest for the agency to be involved as both gatekeeper and agent for PPP projects. We made the point and continue to believe that the transfer of responsibility for capital projects away from Departments deserves, at best, one cheer. It remains to be seen whether that change will bring better performances or any benefit at all.

The report that we are discussing includes some good news. Given the appalling state of our social housing waiting lists, Fine Gael welcomes the involvement of the agency in housing projects in Infirmary Road, O'Devaney Gardens, St. Michael's in Inchicore, Jamestown Road, Dominick Street and Bridgefoot Street. To give credit where it is due, the M4 Kilcock-Kinnegad motorway opened in December 2005, ten months ahead of schedule, while the National Maritime College was built under a PPP in 18 months and came in on time and within budget.

However, those are not typical of capital project delivery in this country, and nobody should trumpet those small successes too loudly, if only because they are in stark contrast to so many badly handled projects. The key challenges that face the country in the future are the establishment of a suitable infrastructure for a First World economy. Despite all our wealth, we still have no metro, no joined-up Luas, not a single rail line to any airport and no real renewable energy infrastructure. Governments need to show real political leadership to get these things done. By leadership I do not mean anything like the glossy, flimsy and aspirational Transport 21.