COMMITTEE of PUBLIC ACCOUNTS debate - Thursday, 28 Jun 2001

National Roads Authority.

Mr. Niall Callan (Secretary General, Department of the Environment and Local Government), and Mr. Michael Tobin (Chief Executive Officer, National Roads Authority) called and examined.

Chairman

I welcome Niall Callan, the new Secretary General of the Department of the Environment and Local Government. He has succeeded Mr. Farrelly who was a familiar face at this committee. I wish Mr. Callan well in his new position.

I remind you that as and from 2 August 1998 section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons who are identified in the course of the committee's proceedings. Notwithstanding this provision in legislation, I should remind members of long standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

Perhaps Mr. Tobin would introduce his officials.

Mr. Tobin

That is a matter for each authority. Parallel with the requirement that the insurance we look after for the work of regional design offices or local authority design staff, we also require certification that all consultancies working on our projects have an equivalent level of liability insurance at all times.

Deputy Doherty

Mr. Tobin referred to electronic tendering. I am quite illiterate in this area and would welcome some information as to how it works. What are the tendering practices? It was suggested to me that minimum levels are required before tenders are accepted.

Mr. Tobin

Am I correct in saying that the ratio in regard to local authority contributions has been changed?

Mr. Tobin

In this case we are talking about full cost grants.

That does not clear my concerns. In fact it further emphasises my doubts. I am concerned at where we are heading at this stage. Notwithstanding the legitimate case that can be made for the roads, I have no problem with that or the need to build new roads, I am concerned that there is a combination of the public and the private sector whereby it will be deemed by arbitration at some stage that it is in the common good to proceed in a particular fashion when we know that the private sector will make a profit. I have no problem with it making a profit so long as it pays for it and that the common good coincides with the individual corporation's eventual good. The theory that existed heretofore whereby public funds were at issue and where the public purse was totally involved is not the same any more. It is an attempt now to hitch a wagon to a different vehicle and it will cause considerable problems in the future.

I attended a number of public hearings in the past. I am not satisfied that the points I have raised have been addressed or are likely to be addressed because I have gone through all the procedures referred to. I strongly object to the notion that in a public private partnership it is sufficient to explain that "the procedures are there, and they are the procedures we will go through". I do not accept that. I attended quite a number of public hearings in regard to compulsory purchase, a procedure that has to be gone through in the event of their being no agreement. The most peculiar thing about a compulsory purchase is that an influential individual, not necessarily a farmer or a wealthy business person, who may find his property seriously devalued as a result of a proposal, wants to know what the compensation will be paid, in which case he will be able to withdraw his objection on that basis or do otherwise. The procedure is that the compensation is a separate issue and the making of the compulsory purchase order comes first. This means they are put in an invidious position where they have to fight a rearguard action. Having looked at some of these issues in the past, I am of the view that the National Roads Authority is storing up trouble for itself, unless it takes into account the experiences I have had. No doubt they will be multiplied in the not too distant future.

Mr. Tobin

I must admit, I am at a loss to put a handle on what has been said. Let me seek to assure the Deputy that in the project between Kilcock and Kinnegad——

Deputy Durkan

I am not talking about that one alone.

Mr. Tobin

Taking it as an example, I would argue that the local authority designing that project will be taking the same account of the requirements as the local inhabitants as it would have done in the past. I am not sure that the argument about the PPP involving some consortium making profit should be made as a reason for saying somebody will cut corners. The private sector consortium building roads under our standard arrangements, is also a profit making arrangement. At least we assume it is, otherwise they would all be gone out of business. There is a profit even in the traditional contracting method. There will surely be a profit also in relation to the PPP type operation. I would not be prepared to accept that any short cuts are being counten-anced just because these projects are being advanced.

Deputy Durkan

That was not the point I was making. The point I was making was not necessarily about short cuts but that this was a new animal that was appearing on the scene. The point made was that this was a new issue previously under the local authorities or the public sector only. This is now a utility service being provided for the private sector. It is not the same thing in terms of the rights of the individual or of those who have had use of a road, lane, bypass or wayleave or whatever. It is far more involved than Mr. Tobin makes it out to be.

I have one final question which has agonised me for weeks. I have had occasion to travel up and down to Tipperary and off the Portlaoise bypass there is a row of cones on the left hand side as one exits for Cork. My colleague will no doubt confirm that as he travels that way regularly.

Deputy Dennehy

I did not get the full details so was concerned because it sounded similar. I notice that this will only apply to new roads and realignment of major roads. It was a costly lesson for us, £3.2 million. Is there any intention to use the lesson in a wider field, maybe in the DE, in contracts other than just for roads?

Mr. Tobin

I am reluctant to answer for that.

Mr. Callan

I wish to respond very briefly to Deputy Dennehy's request because he is bringing the discussion into other infrastructural programmes for which the Department has the supervisory responsibility. The answer certainly is yes. My predecessor, Mr. Farrelly, and I gave assurances to the committee. We would not be rash enough to think that similar hazards do not lie in wait for us in relation to projects arising in other programmes. It is a relatively simple and straightforward matter to apply some of the safeguards that Mr. Tobin has spoken about immediately from the national roads area into the non-national roads programme. We are doing that in parallel with the work that the NRA is doing. Where applicable, all the good things that the NRA is doing now to tighten up processes will benefit the non-national roads programme straightaway.

In relation to water services programmes, there is a greater responsibility and a greater use of private consultants to design schemes and assess tenders than has been the case historically in the roads area. To a greater extent we rely on the insurances to be carried by these private consultants. We have already taken steps in relation to the water services programme to bring the risks which came to light in this instance to the notice of all concerned in the operation of those programmes. We will continue to liaise with NRA as we go forward.

Chairman

I asked Mr. Tobin earlier whether they had taken out insurance safeguards up to the tune of £5 million to cover themselves against eventualities as happened in Limerick in the design office. I asked what would be the responsibility of local authorities in that situation or would they have any responsibility.

Mr. Callan

As I understand it, and Mr. Tobin may be able to clarify this more, the indemnity that Mr. Tobin has spoken about is indeed being paid for by the National Roads Authority in relation to national roads. It may well be beneficial to individual local authorities, that is my understanding. It is not an indemnity that just applies to one organisation, the National Roads Authority. It applies to individual local authorities acting in their road authority capacity also.

We have looked into the question of insurance for other services. In relation to water services it is more relevant here to remind private consultants of their insurance responsibilities which already arise under the contracts that we have with them in relation to major water schemes, and that is being done.

We are looking more generally at the question of insurance in the light of what is happening and I can certainly get a note on that for the committee.

Chairman

The reason I asked in the first place is that Mr. Tobin said that in order to pay the compensation of £3.2 million, you paid a certain amount of it but the council out of its own funding——

Mr. Tobin

It would have been the difference between £3.2 million and our contribution of £2.88 million. Perhaps I should say that it was my understanding that the local authority had cover for about £250,000 through insurances they had. It was not the type of insurance one would normally associate with this type of situation. They were insurances to cover administrative error but effectively in this instance Limerick County Council had that cover and were able to avail of it to meet £250,000 of their contribution.

Chairman

The point is you would not expect them to be taking out parallel insurance cover if you are covering the tab for eventualities on the design office. They felt at the time that they had to make a contribution.

Deputy Dennehy

May I raise the question of road signage with you? I would presume that the NRA as the experts would design and recommend a standard of road signage for all the major roads. The signs are in a very bad condition, they are battered and broken, even though many of them are relatively new. There are at least 43 shattered road signs on the Cork to Dublin road. Some are the smaller brown local destination signs and speed limit signs but many of them are the new signs and they are already in very bad condition. I was only counting the signs on my own side of the road as I travelled to Dublin and I believe there are a greater number than that. There are a minimum of nine or ten major signs damaged. Surely the NRA can design signage that will not be damaged so quickly. This should be regarded as an urgent matter. They are very costly and they do no credit to the country.

Thanks to my colleague, Deputy Michael Ahern, I am in possession of an excellent document from the Fermoy by-pass group. This document is titled "Tolling National Primary Routes". I presume Mr. Tobin has received and studied a copy of this document. It makes some very reasonable arguments on the question of tolling.

Deputy M. Ahern

The question is are they reasonable.

Deputy Dennehy

I presume that they are reasonable. I have personal experience in a number of instances. I have been to see the Severn Bridge when we were talking about a tunnel or a bridge for Cork. That bridge was a disaster because of tolling. People have now learned and that bridge is tolled in one direction only. The local authority in Gloucestershire found in the 1980s that it did not solve the problem of removing cars from the city centre and people were not using the bridge. The Severn Bridge project has not been succcessful. Many Irish people will have travelled on the Autopista del Sol in Spain. It has been another disaster from the point of view of taking people off the old road. There was only a 2% drop in traffic. They are two examples of when a toll charge is pitched too high, people will not use the facility. We were very concerned in Cork about the tunnel. I have seen examples where it has not worked.

I was chairman of the roads committee in Cork when we were deciding what we would do there. There are reasonable arguments made in the Fermoy document about funding. I think they are reasonable, whatever my colleague, the accountant might say. If the toll is pitched at our present price, people stand to make billions of pounds in profit over the next 30 years. This seems an unreasonable amount of profit. How will a reasonable profit be evaluated? A toll of £1 and £2 for heavy vehicles seems a very easy kind of system. The argument is made based on the Fermoy-Rathcormac bypass example on page 9. At a cost of £63 million they say that the bypass would take in £821 million and it would pay for itself 13 times over if it were hard tolled as they describe it.

We were soul searching for a long time in Cork and many of us argued for and against tolls. It was stated that heavy vehicles would not come out of Cork city centre. I appreciate that the NRA will have looked at this and tried to get some kind of balance. However at what point is the level of tolling decided upon? How is it worked out? The growth in the number of vehicles was totally underestimated by the experts in the Department of the Environment and Local Government over the last 15 to 20 years. We all know we have the number of vehicles now that we were supposed to have in 2020. I wonder how we arrive at these figures.

Are we giving too large a cheque to somebody with the money to invest? I do not begrudge people making profit. It is the only way the country can keep moving and I have no ideological hang ups. However, is there any cut off point? If they reach a certain figure after five years, will the road be given back to the State? Cork Corporation was one of the first authorities in the country to buy back a high rise car park. It was innovative then, but everyone is doing it now. It was based on a fixed number of years and the owners had to make their profit in that time. If we give it to them for 30 years, are we really taking a risk on giving them excessive profit and can it be used against us?

Mr. Tobin

I am taken aback by the Deputy's comments on the road signage between here and Cork. We have co-ordinated a programme of putting a new signage regime in place on the national primary and secondary routes. We are close to the end of implementing that on the national secondary routes at the moment. The signage content is agreed with the local authority personnel and the implementation is by private sector contractors having got the appropriate directions and instructions.

I am seriously concerned at what the Deputy has to say because, apart from anything else, the loss of the signs means that people are not quite sure where they are going. He seems to be saying there is a road safety issue there. I undertake that we will review that and other routes to see to what extent this is happening, seek to put it right and ensure that in locating signs we are not in any way contributing towards poor safety on the road network.

Deputy Dennehy

On that point, I emphasise that I am totally in favour of the content and the design of the forward warning signs. They are excellent. It is their location and physical destruction that I am concerned about.

Mr. Tobin

I take the Deputy's point.

On the issue of tolling, we will stick with the Fermoy example. He mentioned the Severn Bridge. The toll on that bridge is single direction in that a person pays a toll in that direction and on the way back they travel for free. It is £4.20 for a car to pass over the Severn Bridge. In the case of Fermoy, the toll we have proposed is £1.10. It is a far more modest level of charge. We opted for that bearing in mind transportation studies we did. We got a feel for the number of vehicles using the route and a feel for the extent to which a particular toll regime would lead to diversion from that. In the case of Fermoy, we are quite satisfied that the level of diversion using the toll we propose will be quite small.

We see construction cost for the Fermoy-Rathcormac bypass approaching £100 million. In the context of remarks that there will be massive profits here, the consortium obtaining this toll franchise is required not only to build the road but also to maintain it for something like 27 years. We normally expect a 30 year concession, including the construction period. Allowing three years for construction, in addition to spending something approaching £100 million to build the facility, the consortium has to man the tolling operation for 27 years and has to maintain the road to a proper standard for that period. It then has to hand the road back to the public sector with a residual life at the end of the 30 year period.

We believe that the toll revenues will meet about 70% of the construction cost in the case of Fermoy. We believe the toll revenues will be worth about £122 million in today's money. I say that bearing in mind that £1 in 15 years may have a current value of about 32 pence. A pound in 30 years, which is the end of the concession period, is worth about 10 pence today.

The comments which I quoted do not represent my personal opinion but simply what I read in the newspapers, where the NRA is certainly getting a very harsh profile at present.

Deputy Bell

I apologise for my late arrival due to another commitment. At a previous meeting, I asked Mr. Tobin a question about the building line near motorways. I do not know if that question has been asked here. There was no co-ordination with local authorities. Therefore, the building line was applied to a greater extent in some counties, as in the case of Louth and Meath. This created many problems for a State company which lost a substantial amount of money due to the building line being extended. I asked for that to be considered with a view to co-ordination on a national basis, and so that people buying land would know in advance what the building line was to be, and if a motorway was to pass through. Has any progress been made on that?

Mr. Tobin

I am not aware of any. The issue of a building line, or a setback from a road or motorway, is a matter for determination by local authorities in the preparation and development of their county development plans. That is a reserved function of local authorities. Regardless of the advice we give, the final decision rests with the elected members of local authorities. I would be reluctant to interfere in their business and tell them what the building line should be.

Deputy Bell

I thank Mr. Tobin for his reply because he has clarified one point. The officials in Meath advised the elected members that Mr. Tobin's organisation was responsible for that extension. Mr. Tobin clarified that in writing and I want to put it on the record. This is a question for the local authority and not the NRA. I have travelled southwards several times in recent months. I cannot help asking why the bypass at Nenagh is a single-carriageway. Why is it not a dual carriageway? Would Mr. Tobin agree that it will cost a fortune to extend it at a later stage?

Mr. Tobin

Mr. Tobin

We should realise that there is a difference between the work of Bord Gáis and the building of a road through a farm by a local authority. Once Bord Gáis has finished its work and filled the trench, the farm is the same as ever in terms of raising stock or growing crops, apart from the fact that buildings may not be built on the pipeline. If a road is built on a farm, it will be there forever. The NRA supports liaison with the IFA. There have been ongoing negotiations on the issue of compensation between the IFA and the Department of the Environment and Local Government and the NRA was represented at meetings. The figure of £10,000 that has been mentioned by a number of people is the lowest that has been paid in recent years. Strict rules for assessing compensation flow from the use of compulsory purchase orders. Urban dwellers and others are affected by such orders, but we are talking about the farming community. An amount of compensation equivalent to the straightforward value of the land, along with compensation for the disturbance caused to the landowner and for severance or injurious affection, is allowed under the strict rules of compensation. Members can rest assured that many settlements exceed £10,000.

To address any confusion that may have set in, I will make a few points. There seems to be a principled objection to compulsory purchase powers which have been used for many years. In the common good, local authorities may use such an order to provide public services. The compulsory purchase order system has been tested in the courts and has been found to be viable. The NRA recommends that local authorities should use compulsory purchase orders for a number of reasons. It is unrealistic to assume that the property of each of the 20, 30 or 40 people affected by a major project can be acquired by agreement. A small number of people could hold up an entire project, but such difficulties are overcome by using compulsory purchase orders.

It is possible that a very small number of people - possibly even one person - could hold up an entire project. By having the CPO quietly in the background that difficulty can be overcome as it is reached. There can often be difficulties with the type of property. The person occupying the property may well have been given it by a maiden aunt who in turn may have inherited it from somebody and God knows whose name is with the Land Registry. The person has been in occupation without hindrance and they are quite happy, but when it comes to the formality of someone seeking compensation that becomes an issue. By having the CPO the local authority has clear title to that property and the issue of compensation and ownership can be handled in accordance with that.

Vote 31 - Agriculture, Food and Rural Development.

Mr. J. Malone (Secretary General of the Department of Agriculture, Food and Rural Development) called and examined.

Chairman

I welcome Mr. Malone and his officials. My apologies for detaining you so long. Roads and the National Roads Authority have become a very important issue in recent times.

Witnesses should be aware that they do not enjoy absolute privilege. I remind you that as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons who are identified in the course of the committee's proceedings. Notwithstanding this provision in legislation, I should remind Members of long standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

It has not been finalised. It is a matter for the European Commission. It is a grossing of the figure. Deputy Rabbitte is aware of the background.

That is not a fair way of putting it. The Deputy is referring to a Government decision to establish a separate FEOGA payments agency. The difficulty that emerged was that, subsequently, the Government made another decision to set up a Food Safety Authority involving the same people. Obviously, it could not have recourse to both agencies. The Food Safety Authority has been established, which is well known. There are a number of people in the Department working on contract for the Food Safety Authority.

It is important to bring to the attention of the committee that we now have much greater powers under legislation that was enacted earlier this year at the height of the foot and mouth disease crisis. The penalties now are much more significant. Our difficulties are like those of any other organisation, we have to operate totally within the law. We have to apply fair procedures. We get a great deal of help and co-operation from the Garda, but it is for the courts to decide when we bring a case to them. One of the positives that has come out of the foot and mouth disease episode is better powers and legislation to deal with wrong-doers. There is also a less tolerant attitude within the community to these people now. We hope the industry overall has learned a salutary lesson.

Mr. Malone

Yes. The point I am trying to convey is that I do not think the Department or the Minister did anything to delay the case. We have no problem with——

Chairman

I do not want it to be like the beef tribunal where people like him and others ended up being victims of the whole saga while the main players seem to pass by. That has been discussed many times before. I apologise to Mr. Malone forkeeping him so long. I assure him that in the event of a second sitting in the future we will not have people here at 11 a.m. waiting that length of time. I thank him for his response and the comprehensive notes sent to the committee as a follow-up to the queries raised on the last occasion. The committee will be monitoring and tracking the effectiveness of how he is proceeding and will have an opportunity in the future to speak with him.

We note the Vote and thank him for his attendance. He and I will be on opposite sides next Sunday. May the better side win.

Deputy Bell

Perhaps Mr. Malone will keep us updated on that subject.

Mr. Malone

Yes.

Chairman

Perhaps we can have another report at a later date.

The witness withdrew.

The committee adjourned at 2.15 p.m. until Thursday, 5 July 2001.