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Dáil Éireann debate -
Thursday, 21 Nov 2002

Vol. 557 No. 6

National Development Finance Agency Bill, 2002: Second Stage.

I move: "That the Bill be now read a Second Time."

I have great pleasure in presenting the National Development Finance Agency Bill, 2002. The Bill is an integral element in the Government's determination to ensure that all available sources of funding are utilised for infrastructural projects, including private finance.

The purpose of the Bill is to establish a national development finance agency, the NDFA, under the aegis of the National Treasury Management Agency to assist in providing cost effective finance for public investment projects. The agency will be staffed by experts with relevant experience, for example, in corporate finance and risk assessment. The NDFA will help to maximise value for money for the Exchequer in a number of ways, including the identification of the best financing packages and the application of commercial standards in terms of evaluating financial risks and costs for each project.

In addition to maximising value for money for the Exchequer, the functions of the NDFA will include: providing advice to State authorities, including Government Departments, to assist them in evaluating financial risks and costs of infrastructure projects and facilitating them in availing of the best financing package for each project; assessing optimal financing for major infrastructure projects set out in the national development plan and other infrastructure priorities; and, in some circumstances, raising finance for projects including certain design, build, operate and finance public private partnerships where this would be more cost effective than private funding and, in respect of conventionally procured capital projects, where there are clear benefits offsetting any increased cost of agency funding over Exchequer funding.

In relation to the provision of advice, PPP projects are complex, requiring expert technical, legal and financial advice. A centrally resourced expert advisory service to all State authorities would be more economic than employing experts in each of these areas in every procuring authority, including the local authorities. This role can be filled by the NDFA in respect of financial advice. In this way significant cost savings could be achieved over time.

The NDFA will help to maximise value for money for the Exchequer by identifying the best financing packages and by applying commercial standards in terms of evaluating financial risks and costs for each project. In order to assess the optimal means of financing projects, the NDFA will acquire the expertise to assess the relative merits of different project structures such as traditional procurement, design, build and operate – DBO – PPPs and privately financed PPPs. It will be a part of the NDFA's role to advise procuring Departments and agencies as to the appropriate financial structure and to evaluate proposals submitted by the private sector. This will assist procuring authorities by applying commercial standards in terms of evaluating risks and costs associated with projects. Prospectuses and invitations to tender will make it clear that the NDFA will be involved in assessing and advising on proposals and where appropriate will reserve the light to accept or reject any particular financing package and instead to utilise funds provided by the NDFA. The objective will be to ensure overall best value for money and encouraging the maximum private sector involvement in financing projects.

The legislation provides that State authorities will be obliged to seek NDFA advice. However, an important consideration is that they are not obliged to take it. The final decision on the structure and financing of a project remains a matter for the appropriate Minister, or where there is delegated sanction, the appropriate accounting officer or equivalent. The legislation also provides that after consultation with other Ministers, I will issue guidance on the circumstances in which NDFA advice should be sought – taking account of the type of project or programme of projects, stage of development of a project and any other relevant factors, and the need to comply with procurement rules and avoid conflict of interest. This guidance will be drafted with input from a cross-departmental team which will include a representative of the Office of the Attorney General in an advisory rather than executive capacity. The NDFA will also be consulted.

It is expected that the benefits of NDFA will include maximising value for money by: identifying the best financing packages; applying commercial standards in terms of evaluating financial risks and costs for each project; in instances where private sector finance is unsuitable, raising finance itself or via SPCs; and centralising commercial expertise, thereby reducing dependence on external consultants with consequent cost savings.

Where the NDFA is able to borrow at better rates than the private sector, less State subvention may be required for capital projects underpinning the PPP approach to the delivery of infrastructure. It is intended that NDFA financing will be backed by Government guarantee.

The general Government balance or GGB is an EU measure of state finance which includes any non-Exchequer financing which the state, or state organisations, discharge. It is the critical measure of what can be accommodated within our obligations under the Stability and Growth Pact in the context of the Maastricht treaty. The impact of NDFA financing on the GGB would depend on the nature of the projects being financed and ultimately on rulings by EUROSTAT.

Section 5 of the Bill will provide powers to enable the establishment of special purpose companies or SPCs to give the NDFA additional options in raising moneys on the most beneficial terms for relevant projects. Section 5 provides that the NDFA may itself form an SPC or cause it to be formed; that SPCs are for financing purposes only; that the consent of the Minister for Finance must be obtained in writing before each company is formed; that SPCs will not have a Government guarantee; and that there will be no recourse to the Exchequer or to any State authority.

The possible use of SPCs offers the following benefits: the optimal financing structure can be put in place to raise the money to invest in a project such as a bridge, tunnel, etc., with hard tolls where private sector financing packages are not sufficiently attractive; and key concerns of investors – for example, the debt repayment capacity of the borrower and the risk that the cash flows may be diverted to another party – can be addressed. Where the cash flows are sufficient to service the debt the best way to insulate them and give maximum protection to investors-lenders is to form an SPC as the financing vehicle for the project. This SPC would raise the moneys for the project and have priority rights to the cash flows, e.g. tolls. Such an SPC would not get involved in any other projects. Therefore, investors would have more confidence that their investment would be repaid. In return, the SPC should be able to raise the moneys on better terms – that is, a lower cost of borrowing.

The proposed legislation imposes rigorous corporate governance requirements regarding areas such as disclosure of interests and disclosure of confidential information. The Bill also provides that the chief executive officer and the chairperson of the NDFA shall, whenever required by the Committee of Public Accounts, give evidence to that committee.

It is a stated aim of the Government that the NDFA should have a critical role in developing the best means of financing a wide range of public sector investment projects in a manner that is flexible and responsive to the needs of our economy. The projects will include infrastructure projects and programmes under the NDP.

Of particular importance will be the role of the NDFA in underpinning the development of PPPs. There are already in excess of 40 PPP projects at various stages of procurement and, where the key objectives of value for money and deliverability are met, these numbers may expand over the next few years. Again it is important to remember that under the Government's approach, and in contrast to the PFI in the UK, PPPs in Ireland include design, build and operate projects where there has never been any prospect of private finance. Accordingly, it is wholly realistic to envisage a substantial level of NDFA activity in relation to the future development of PPPs even before other types of projects are addressed. I see the NDFA having a pivotal role in applying lessons learned from the initial pilot PPP projects to the financing of future projects. Achieving value for money for the Exchequer is one of the central aims of the PPP programme and the application of the best available financing arrangements to PPP projects is an essential element in delivering economy, efficiency and effectiveness.

While the Bill will be discussed in detail by members on Committee Stage I will describe some of its important specific provisions. Section 1 is a standard interpretation section containing definitions of certain words and phrases used throughout the Bill. Section 2 provides for the establishment of the agency as a body corporate on a day to be appointed by order by the Minister for Finance. Achieving value for money for the Exchequer is one of the central aims of the PPP programme and the application of the best available financing arrangements to PPP projects is an essential element in delivering economy, efficiency and effectiveness.

While the Bill will be discussed in detail by members on Committee Stage I will describe some of its important specific provisions. Section 1 is a standard section containing definitions of certain words and phrases used throughout the Bill. Section 2 provides for the establishment of the agency as a body corporate on a day to be appointed by order by the Minister for Finance.

Section 3 is the key section which sets out in precise form the functions of the agency. The section provides that the functions of the agency will be to advise any State authority on the optimal means of financing major public investment projects, including PPP arrangements, in order to achieve value for money; to advance repayable loans, including equity, and enter into other financial arrangements regarding projects approved by any State authority; to provide advice to State authorities on all aspects of the financing, including refinancing and insurance, of major PPP projects; and form companies subject to section 5 for the purpose of securing finance for public investment projects.

Section 4 provides that, in the provision of advice, the agency must take into account any policy directions regarding financing of major public investment projects or detailed policy guidance in relation to the process, procedures and regulation generally of PPPs issued by the Minister for Finance to State authorities. Any advice given under the Act shall be independent of any potential benefits to the agency or the NTMA.

Section 5 provides that the agency may form special purpose companies – SPCs – in order to provide finance where it is the opinion of the agency that this is necessary or expedient in order to discharge its functions under the legislation. The formation of such companies must have the prior written consent of the Minister for Finance in respect of each project. SPCs set up under this section can borrow money. The section provides that no guarantee, loan or subvention will be given to any company established under this section by the Minister, the agency, the National Treasury Management Agency or any State authority or other State body. No liability shall attach to the State in respect of any act done by a company established under this section or in the winding up of such a company.

Section 6 authorises the agency to borrow moneys in any currency subject to the consent of the Minister for Finance and stipulates that the aggregate of the sums borrowed, guaranteed and outstanding by the agency cannot exceed €5 billion. The agency will have the power to effect contracts in order to fix, eliminate or reduce the risk of loss from changes in interest rates, currency exchange rates or the cost of borrowing or other transactions carried out in the course of that business. In addition, the agency can open and maintain bank accounts.

Section 7 provides that the Minister for Finance may guarantee the due repayment by the agency of the principal of any moneys and-or the payment of interest on such moneys borrowed by the agency. The Minister for Finance must give the Houses of the Oireachtas an annual statement with respect to each guarantee setting out certain specified particulars. Any moneys paid by the Minister for Finance under a guarantee must be repaid, to the Minister within two years. If not repaid, these will be paid out of moneys provided by the Oireachtas. Any payment by the Minister under this section will be a charge on the Central Fund.

Section 8 sets out that State authorities, in accordance with any guidelines issued by the Minister for Finance, must seek the advice of the agency on the financing of public investment projects. Section 9 specifies that the agency shall perform its functions through the National Treasury Management Agency and accordingly provides for the appropriate amendment to the National Treasury Management Act 1990.

Section 10 provides that the board of the agency, which will consist of a chairperson – who will be the chief executive officer of the National Treasury Management Agency – and four ordinary members, shall ensure that the functions of the agency are being performed effectively, set the objectives and targets to be met by the agency and ensure they are carried out. The Minister for Finance will appoint the ordinary members for a term of office of five years. Other matters relating to board members such as remuneration and allowances for expenses, terms relating to holding office and the disqualification, resignation or removal from membership of the board are also dealt with in this section.

Section 11 deals with the appointment by the board of the chief executive officer of the agency. Section 12 provides for the holding of meetings by the board, the first of which will be on the establishment day of the agency. It also specifies details such as the quorum, who should chair meetings, voting rules, and the procedure and business of meetings. Section 13 provides that the agency shall have a seal and sets out who may authenticate the seal. Judicial notice will be taken of the seal. It also lists those who may enter into and execute any contract or instrument not requiring to be under seal.

Section 14 stipulates that a member of the board cannot be a member of either House of the Oireachtas, the European Parliament or a local authority, vocational educational committee, health board, or the Eastern Regional Health Authority.

Section 15 provides that a member of the board or staff of the agency or a consultant, adviser or other person engaged by the agency must disclose any interest in any matter, in advance of any consideration of that matter by the board or the agency and cannot influence a decision or take part in consideration of that matter. Any such disclosure is to be recorded in the minutes of the meeting of the board or otherwise recorded by the chief executive officer. The section also sets out in what situations a person can and cannot be regarded as having a beneficial interest. If a member of the board contravenes these disclosure provisions the Minister for Finance will decide the appropriate action to be taken, including removal from office. If a member of staff of the agency or a consultant, adviser or other person engaged by the agency contravenes the disclosure provisions the chairperson will decide the appropriate action to be taken. The section also provides that the agency shall issue and publish guidelines as to what constitutes an interest.

Section 16 provides for a prohibition on unauthorised disclosure of confidential information and a person who contravenes this shall be guilty of an offence and shall be liable to a fine or imprisonment or both.

Section 17 provides for a prohibition on communications for the purpose of improper influence with a person guilty of an offence under this section being liable to a fine or imprisonment or both.

Section 18 requires the agency to keep accounts in such form as may be determined by the Minister for Finance and specifies certain details in relation to borrowing and fundraising by the agency and its transfer to individual projects, which must be included in the accounts. The audited accounts must be copied to the Minister and laid before each House of the Oireachtas and must note a record of expenses incurred by the agency. The section also provides for an amend ment to the National Treasury Management Act 1990 to the effect that the audited accounts of the National Treasury Management Agency shall note a record of expenses incurred by that agency in the exercise of its functions under this Bill. The chief executive officer and the chairperson must, when required, give evidence to the Committee of Public Accounts on specified matters.

Section 19 provides for the making of a report by the agency to the Minister for Finance not later than six months after the end of each financial year in relation to its activities during that year. Section 20 provides for the amendment of the Schedule to the Act. Section 21 is a standard provision to the effect that expenses incurred by the Minister in the administration of the Act shall be paid out of moneys provided by the Oireachtas.

Section 22 provides that administrative expenses of the agency will be charged on the Central Fund, that expenses incurred in the performance of its financing functions will be recovered by repayments on loans advanced by the agency and that expenses incurred in relation to advisory functions will be recovered by a charge on the Vote of the appropriate Department. Section 23 provides for the Short Title to the Bill. The Schedule lists the State authorities covered by the Bill.

I reiterate the Government's aim to establish this new agency which will have a critical role in developing the best means of financing public investment. The NDFA will advise sponsoring agencies such as Departments, local authorities or statutory bodies on the optimal means of financing major infrastructure projects; it will provide ongoing financial advice as projects are procured and in certain circumstances the NDFA will raise finance for projects. The purpose of the agency is to deliver value for money for the Exchequer by facilitating the best financial arrangements for projects. This, in turn, will assist in the delivery of key elements of the NDP and other infrastructure priorities. My aim is to have NDFA operational by 1 January 2003.

I commend this Bill to the House.

I cannot offer the Minister my support for this Bill. The national development plan is a shambles. The delivery of projects is behind schedule and there have been massive cost overruns. The recent report of the roads plan showed a 66% overrun in the cost of the roads programme. We have seen delays caused by poor planning and as a result of land bottlenecks. There are serious problems of stop-go funding. In last week's Estimates the Minister decided to cut productive infrastructure investment by 17% in real terms. As a result it is impossible for project managers to manage their projects efficiently.

The capability of the Government to manage this programme must be seriously questioned. Taxpayers are making a heavy investment but the Ministers and their advisers are not delivering the product. That is the issue. "Where is the beef?", is the question.

The Minister wants to be seen to be doing something and that in itself is encouraging, but this is not tackling the real problem. Any objective assessment of the real problem with the NDP will say it is the lack of a durable plan and a clear commitment to carry it through. That has not been evident from Government. We are nearly at the half way stage of the National Development Plan 2000-2006 and we still do not have any spatial strategy that would tie the projects together and achieve the necessary consistency, coherence and concerted roll-out with a real Government commitment.

The delivery of projects is sloppy. The Minister has allowed different Departments to sloppily monitor the physical projects and that is evident from the comments on the NDP by the consultants employed. There has been sloppy control of over-runs and sloppy monitoring of costs. Everything about this has represented slippage. There is continuous slippage backwards and it has become the order of the day.

Of course the Minister is deafeningly silent about one of his most interesting financial projects, namely, the establishment of the national pensions fund. I fully support him in putting money into that fund but I cannot support the advanced form of lunacy demonstrated by the decision to borrow over €1 billion next year to put into foreign stock markets and equities, at a time when our infrastructure is groaning for the want of funds. It is lunacy given that we are sacrificing jobs as a result of congestion costs and the lack of a proper roads and telecommunications infrastructure. The Minister is propping up employment in the foreign exchanges of Frankfurt and Tokyo and bringing funds to bear on the Nikkei and other indices we hear about every morning as we come into work.

The Minister obviously wants to see the pensions fund enjoying long-term returns as a result of investment. He is talking about tolling assets and related charges, but surely, if the public has to face these, the money should go into a fund that will ultimately benefit the people. This Bill is poorly thought out. It is not addressing the core problems and should be set aside until we get a more robust assessment of what has gone wrong with the NDP and what are the best ways forward.

There are three elements to the successful delivery of infrastructural projects – sound project choice, cost-effective funding, and the efficient and speedy design, building and operation of projects. Of these three the Minister is addressing only one. He will admit that the greatest problems in the public sector have not come from a lack of cost-effective funding. The Government is extremely efficient at raising finance. The NTMA does a good job in keeping down the cost of finance. That is not where the problem is arising in the delivery of the NDP.

The delivery of the NDP is hampered in many cases by poor project choice, which we have seen in respect of Stadium Ireland. I have never seen a project so poorly analysed or appraised before it got enthusiastic support – not from the Minister, Deputy McCreevy, but he had to acquiesce in the folly of others. The other reason why the public policy is going wildly off track is its inability to deliver efficient and speedy building, design and operation of projects. The problem lies in the management of projects, not in their financing. That is something the Minister has overlooked. I think he knows it in his heart, but he is bound by some manifesto commitment to go ahead with this.

The sole focus of this Bill is on funding, and that is not an area where there is any potential for big savings, nor is it the area in which the private sector has most to offer the public sector in terms of insight. The private sector has most to offer in the areas of design, building and operation, and if we are to look for private sector insight we should look for it in regard to those areas.

I presume some of the projects the Minister is considering have no income stream and some have a potential income stream. As far as the ones with no income stream are concerned, the funding is just like raising a mortgage. Why should we be considering going to the private sector to raise funding to set up some companies, or SPCs as the Minister is calling them, when we know the Government is the most efficient raiser of public funding? It has the best credit rating and will not have private sector commissions or add-ons to pay. Clearly, there are few circumstances in which it pays the State to go for private sector funding of effectively mortgage-type investments.

The only circumstances where that would be an option do not require an agency. These are simply arrangements whereby one leases a building instead of buying it. The Office of Public Works has been doing that for years and I have not heard anyone suggest that it is not good at getting cost-effective leases as an alternative to buying. The alternative is that one lets the private sector build the building and one rents it. That is not an option for schools and it would not make any sense in that regard. One knows that the school and the State will be committed to the project for eternity so there is no advantage in opting for these arrangements over State investment and funding of the project.

This Bill represents the back door to some poor decision making because the agency will have to justify itself. Its justification will be to show it is raising funds, even if the fundraising projects in which it engages are not appropriate.

The second types of projects are those where there is a potential income stream and where private sector funding may do more than simply substitute for the cheap fund-raising capacity of the Minister and his advisers and may add some value over and above just adding its commissions. These projects involve a genuine transfer of risk to the private sector. The Minister has a short-term incentive to want to shift risk to the private sector to evade the stability pact. That is a flaw in the stability pact. If the Minister is being forced by the regulations of the stability pact to make stupid decisions about private sources of funding and the transfer of risk to the private sector that should remain in the public sector, that demonstrates a problem with the stability pact.

Let the Minister go to his colleagues in Europe – where there seems to be a willingness to address the issue – and say that the 3% is unrealistic for countries that require major development and that to address infrastructural deficits we need a more realistic system for controlling fiscal responsibility. Romano Prodi, the President of the Commission, has indicated that there is a willingness to reconsider. I would rather hear the Minister say that he will try to create a better system so we can fund our projects in a cost-effective way rather than setting up a new quango to do stunts that we in this House will find extremely difficult to track. Otherwise we will lose some of our responsibility in holding Ministers accountable for what they are doing on the capital side.

It is not sufficient or robust enough a reason to evade the stability pact to take the sort of funding approach the Minister is talking about. There must be good public policy reasons to do so as well. I have not heard the Minister articulate the good public policy reasons. I have heard him talk about cheaper money, about which I would be dubious. I would like to see good public policy reasons coming from the Minister as to why projects should be put into the private sector.

There are undoubtedly circumstances where a project transferred to the private sector can achieve more market orientation of customers, better management of revenues and more efficient design, building and operation. Harbours are a good example. I see a future in that sort of thing. However, we must be extremely careful in selecting the projects. The Bill offers no public policy guidelines as to when it is right to select private sector funding. Projects that might appear superficially to be good candidates for private sector funding may not be so.

An example that the Minister would know very well relates to commercial pricing. This will not always be appropriate for the use of a public asset. A town bypass is a perfect example. For example, if the Kilcock bypass is tolled it will create an incentive for people to continue to go through the town rather than use the bypass. It is only sensible to toll bypasses if there are capacity constraints. If the public has funded such projects it makes no sense to create obstacles to their use. Tolling should only arise for sound public policy reasons, for example, to deal with congestion.

There is a danger that tolling charges may be imposed for wrong public policy reasons. There are good reasons for having zero cost on the use of public transport at off-peak times when buses travel virtually empty because there is a strong social case to get people to opt for buses rather than cars. However, if the bus services are to be run under PPP arrangements, private operators will seek tolls and will charge the necessary fares even if the result is fewer passengers. It means the imposition of social costs to protect private revenue. There is no evidence of any thinking on this issue in the Bill. The proposed agency will accept advice in this area in the absence of guidelines from the Minister.

There is a need to be careful about whether the risk is genuinely being transferred by PPPs or whether the State will remain the risk bearer of last resort. For example, if the State decides to pull private money into a hospital or prison and things go wrong, the private developers will require control of the revenue stream and the asset, otherwise they will not get involved. They must secure their money and will have a lien on the asset. It means they will cut their losses and close down the project. It would be unthinkable for the Government to close a prison or a hospital, so when things go wrong the Government will have to intervene and pay way over the odds to rescue a struggling project. Examples of this have occurred in France. The Minister knows better than I that rescue packages will always be much more expensive. He has often railed against rescue activity in the past. In many projects the State will act as risk taker of last resort. There is no indication that the proposed agency will be empowered to assess the risks involved as no provisions in the Bill deal with public policy considerations of this kind.

Good public policy dictates that there should be no automatic combination of funding of a project – with the implied lien on assets – with the management of different elements, where private sector efficiencies may be obtained. Other options are available. Management contracts could be agreed in areas where the private sector can achieve efficiency. For example, Irish management tradition in the health services has not been good and a strong case could be made, one which I support, for piloting and testing to see if the management and running of such services can be contracted out.

However, the Bill does not take this approach. By providing for the bundling of operations the State will give away its lien on assets without regard for the implications or consideration of other options. It is unclear if the proposed agency, which will comprise four members and will call on expertise in funding – essentially expertise in corporate finance – has the kind of sophistication required to make these difficult public policy decisions. The problems in the public sector arise not in the funding area, but from poor efficiency in design, building and operation arising from procedures which are too cumbersome, with the result that projects are hampered by delays and poor execution.

The Minister gave no indication of the experiences of the 40 PPPs to which he referred. He spoke of learning from past lessons but he should tell the House what they are and why they justify the establishment of this agency. For example, will he indicate if the school projects built under PPPs provided good value for money? What premium was it deemed worth paying for the transfer of risks to the private sector and how much was paid over the odds? What are the value for money tests applied by the Minister's Department or other Departments?

I understood this Bill was a pillar of An Agreed Programme for Government, yet I am sorry the Minister is leaving the House. It is an extraordinary approach. If this is his pet project he should not have to rely on second hand information about this debate. I am disappointed in his lack of respect for the House.

The Minister also needs to outline if the agency will bypass the value for money tests applied to PPPs, which I understand have been articulated primarily by his Department. Is the legislation a way of getting away from the Department's hard-headed attitude? Perhaps the Minister considers Department officials are too interested in ensuring that the State secures value for the projects involved. Does it mean the agency will overlook the advice of the Department? In recent times Cabinet has overlooked its advice in many decisions especially those affecting Campus and Stadium Ireland. Will the agency be used as a back door to sanction the silly projects the Taoiseach and others have recently fostered? How will the agency fit in with the existing PPP units and agencies? Is there a strong flow of projects in the pipeline and are they robust?

The Minister must make clear what he considers to be the long-term benefits of the agency in public policy terms, not just in creating a centre where there will be a great deal of advice, instead of having it in different places. That is the sort of mindless argument for setting up a brass plate on a door and bringing together all the experts, so that in five years time someone will say that it is not a good idea to have all the experts together and we should decentralise them. That is the excuse for clear thinking about policy issues that is being indulged in, in this Bill.

The Minister is saying it will be down to the EU-EUROSTAT to decide which of these projects is outside and which is inside the stability pact. That means one of the big benefits of getting away from the stop-go flow of funding is gone. The original reason for the wheeze was the annual squeeze where Ministers have recklessly spent on current spending projects that results in a squeeze of capital projects which we are seeing now, which results in job losses because infrastructure dries up. The thought was that this was a clever way for the Minister to get away from the stop-go policies which his colleagues forced on him, or which he allowed them to pursue. However, this does not now appear to be the case.

I am not convinced by the centre of excellence argument because it addresses the wrong problem. I was surprised the Minister did not refer to the National Roads Authority, the Rail Procurement Authority, the Housing Finance Agency and the National Waste Management Agency. These bodies were established in recognition of the fact that local authorities are not good at building, designing and operating projects. Instead of allowing them to raise their own bonds, where funding and efficient management could be brought together under the one agency, another quango will be created with the power to raise money while the other agencies will be one step away from being able to generate the funds necessary for badly needed projects. For example, there is no merit in the establishment of a two headed monster to deal with roads. It will mean the NRA doing one thing while the proposed new agency does another. The Minister has not offered any rationalisation of the merits of that approach.

I oppose Second Stage because I am concerned about the Minister's whole philosophy which underpins and I hope also to signal on Committee Stage some of my other minor concerns. The Minister established State-owned companies, the SPCs as he refers to them, with the power to raise money without State guarantee, which is a clever ploy to make these companies semi-attached to the public sector. However, will it be the taxpayer who is ultimately fooled by this ploy? Where is the accountability in these SPCs? There is no provision for their being answerable to the Public Account Committee, nor for their projects having public information and the FOI will not apply to them or to the agency. It is a black box – an act of faith. These companies will be established and receive public money in loans and tolls but we will have no access to them.

The notion of having one agency as advisor and executor of finance deals does not hang together. The Minister recognised in his own speech that he was on thin ice and stated that the sponsoring Department would not be obliged to take the advice. We are making it compulsory for them to seek the advice but optional for them to take it. The Minister clearly recognises that there is an inherent conflict of interest in two jobs being put together in the one agency, but does not do enough about it. The logical follow-on is to ask why we should give monopoly powers on funding to this one agency, albeit State owned. We should tender it out so that private finance companies are given a fair chance to put together these funding packages. I suspect that there is an EU obligation for such funding to be tendered and this proposal could fall on those grounds. Establishing overlapping membership of the NTMA and the new agency is not good corporate governance, but I await the Minister's arguments on Committee Stage for this. It is not generally the approach taken towards subsidiaries by private companies.

I do not accept the banning of the new agency from commenting on any hare-brained idea that emanates from a Minister. If this is to be a centre of excellence in funding and project management, as the Minister would have us believe, if we are to hand over public money to it, then we must hear if it has hard talking to do about mad schemes from Ministers. Instead the Minister proposes that if it appears before the Public Account Committee, its members cannot comment on Stadium Ireland and whether the benefits match the costs, which is wrong. An elected Parliament should not be treated with such contempt and preventing officials, who are responsible for putting together financial packages, from expressing strong views to the Oireachtas is foolish. The Minister is attempting to circumscribe accountability to the Committee of Public Accounts, but we should be opening out accountability. If this body is involved in hospital projects then the Joint Committee on Health and Children should be able to examine it. It is important to protect public policy which is what we are elected to do on behalf of those who depend on public services. The Minister ought not to seek to limit this because these will be core decisions. If, for example, we decide to toll bypasses, it should not be presented as a technical issue over which the relevant committee has no jurisdiction. This is to pretend that something is good which is bad. It will be bad for people using bypasses, hospitals, prisons and so on.

This Bill is poorly thought out and arises from the political motivation to do fancy footwork on funding because of the stability pact's pressures. The stability pact is foolish and Romano Prodi was correct to describe it as stupid. There should be financial controls on state spending but it is stupid that these prevent developing economies like ours from investing in infrastructure, which is sound. However, we need to find other ways of dealing with this because this way will not solve the crucial problems that have resulted in overruns and poor delivery of projects which affect people. This party will oppose this Bill on Second Stage and if it passes there, we will vigorously seek to amend it on order to protect the public interest and sound policy in the financing of public projects.

I wish to share my time with Deputy M. Higgins.

This Bill and the Minister's presentation today fills me with despair, partly brought on by the rain and the disastrous traffic chaos on Dublin's streets. In the future, this proposal will rank alongside the Minister's ill fated special savings scheme which was launched with great bravado and fanfare but doomed to be a millstone, as we all now recognise, around taxpayers' necks for years to come. There is little merit in the proposal to manufacture yet another agency on top of the National Treasury Management Agency, the NRA and the Railway Procurement Agency. The manner in which the Minister spirited himself away some time ago brings to mind Harry Potter and the Chamber of Secrets. He is not even here to listen to the debate which means that he has passed the first test of a good magician.

We have 20 institutions managing the traffic chaos in the Dublin region and this Bill will add another layer of bureaucracy to any forthcoming national development plan projects relating to public transport, traffic or road building. I can envisage public meetings in the run up to the next general election in which commuter, school and hospital groups will be told with a great fanfare by their local Fianna Fáil or Progressive Democrats candidate that the project they are seeking has been referred to the national development finance agency which will take another couple of years.

The Minister and the Fianna Fáil script factory attempted to put about the impression in relation to the Estimates, and pathetically repeated again in today's press, that Fianna Fáil is a left of centre party. This is at a time when it is shredding the national development plan and essential services in health and education which affect the poor. The same script factory referred to the Labour Party as being in favour of taxation and spending on public services. I intend one day, if I can find a room high enough, to compile a chart of the agencies, quangos and consultants' reports which have resulted in the big, mind bogglingly inefficient structure that the two parties in Government have created and which has resulted in the gridlock which makes everyone in the Dublin region miserable today. They have condemned people to this kind of life with their big government notions resulting in quango piled upon quango and agency upon agency.

As a result, no one in the public services is certain about who is responsible for anything because there is always some other agency that will deal with matters. This will be the mother and father of all the agencies even though, technically, it is primarily about a financial mechanism. All of us here know that its job could be done efficiently by the making some simple, straightforward changes to the powers of the National Treasury Management Agency. That legislation could be easily introduced but as a believer in governing by quango, agencies, boards and consultants, the Government will not agree to that.

The functions proposed for the agency can be carried out by existing agencies. Why should we, as taxpayers, be lumbered with all the associated costs of a new agency simply because Fianna Fáil came up with the idea in the election to cover up its blatant failure to deliver on the projects in the national development plan. Underlining this general approach is the slavish transfer here of the British private finance initiative, and the Minister's attempt to cover himself on that in his speech is just one more bit of gobbledegook from our Harry Potter Minister for Finance, Deputy McCreevy.

I am glad we have been joined by the Minister of State, Deputy O'Dea, whom my late colleague from Limerick used to refer to as "Mighty Mouse" because he blew very loud in Limerick but had nothing to say in the Dáil.

I cannot understand how politicians who pride themselves on their republican credentials are so slavish in their mindless allegiance to these imported dogmas and abandon so readily all critical judgment when they decide to ape their formal colonial masters come what may. Thankfully, the European Commission is putting some break on this crackpot idea of raising capital for public projects by the subterfuge of off balance sheet borrowings hidden under the guise of public private partnerships. No snake oil salesman in history has ever managed to sell a shoddy deal with the skills used to sell this package of damaged goods to the public and to the political establishment. As an accountant, I marvel at the suspension of critical faculties displayed by commentators, public servants and political leaders when they bought this idea.

The record of excess borrowing and cost overruns in past public projects is a serious issue and some diversity of funding and importation of private sector disciplines and skills can offer the opportunity to secure much needed value for money, which sadly has been lacking from the Government for the past six years. I counsel caution, however, in the light of cross-channel experience and our own limited but very revealing experiences so far. There is a distinct danger of putting all our eggs in a very dodgy basket. Ireland is diving into PPPs at the time when wiser counsel across the channel is querying both the cost and effectiveness of private finance initiatives in delivering public capital projects.

I cite in particular the expressed reservations of many accountancy professionals and I hope the Minister, as an accountant, acquaints himself with some of these reservations. One survey of more than 200 members of the Association of Chartered and Certified Accountants found that only 1% were in agreement that PFIs provided value for money and 57% were sure that new schools and hospitals were best provided through traditional routes. The comptroller and auditor general of the national audit office in the United Kingdom, the equivalent of our Comptroller and Auditor General, has publicly judged that value for money tests used in assessing private finance initiative schemes are no more than "pseudoscientific mumbo jumbo".

Hear, hear.

The Accounting Standards Board has also noted that it is off balance sheet financing – off balance sheet financing was an accountant's device to allow people to borrow more while not declaring it. There are many examples of the end result of excessive off balance sheet financing, including Enron and WorldCom, and the same can happen with the national economy.

A BBC radio documentary last week reported that the national audit office in the United Kingdom will publish a scathing review of the cost effectiveness of this approach to school construction. The contractor referred to in that documentary was the same one our Department of Education and Science used in the five schools under construction under our PPP experiment.

Will the Minister indicate if any full evaluation has been carried out of the costs and benefits of this approach in the specific cases adopted thus far? In my constituency, the case of the Abbotstown swimming pool offers no evidence of spectacular success in transferring risk from the Exchequer and keeping costs under control. The opposite is the case. The costs for a swimming pool are now at the €400 million mark. Who are we codding in this country? I am deeply sceptical of the whole idea. I have real concerns about long-term cost commitments and the absence of real competition in the use of the dubious preferred bidder system and I have major concerns about the additional bureaucracy.

We know there is a fight going on in Cabinet between the Minister for Finance and his colleague, the Minister for Health and Children, about what happened to the extra billions for the health services. The Minster should spend a day examining what the Government did in the so-called reform of the Eastern Health Board in the greater Dublin area, where we had one board and one quango. It is an amoebic-like development. We now have four major boards, and they are growing. Extra boards and bodies are being set up almost on a weekly basis, all of them with chief executives, intense management and bureaucracy. That is where the money is going. It is not going to our nurses and doctors, the building of our hospitals, the provision of services such as radiology and so on. That is the disaster this incompetent Government, which has been six years in office, is visiting on us.

One repeated justification for the PPP approach to public finance is the transfer of risk to the private promoters. This is pure fantasy. If a road, railway or hospital is to be built using this device, how can the State allow it to fail? There may be no explicit State guarantee, but it is not like the usual private sector commercial or business venture that depends on private sales and purchases for success, where there is a clear risk involved. If the goods do not sell or the venture does not work, the venture can be closed down but the road or railway builder or the school contractor are not selling their wares in a free market. They are selling them through the State which has to have that road, railway or school in place in a reasonable timeframe to meet public needs and the demands of economic progress. Ministers cannot prove there is a transfer of financial risk.

As in Animal Farm it is a case of chanting, and I fear that is what is happening in the Department of Finance. The chant is, “Private sector good, public sector bad,” every hour on the hour and six times before breakfast, at all times and in all circumstances. It is the only way that the Minister can sell this package because no one would buy it otherwise.

I want to see an accelerated programme of capital works. The delays thus far in the national programme are destructive in the extreme. My party welcomes a distinctive involvement of the private sector in new and creative ways if these are properly assessed and subject to cost and windfall profit control.

Had the Labour Party been returned to Government we would have sought to augment the functions of the National Treasury Management Agency. For at least two years we have been arguing that delivery of the national development plan will require Exchequer borrowing. To obtain the best possible value for money in this regard we envisaged assigning the NTMA the task of advising on how money should be raised for each individual project. Frankly that is nothing more than common sense. Had it required legislative changes we would have been happy to do so. We would not have done what the Minister is doing. We would not have tried to pretend that, because it is called something else, Government borrowing can be anything other than Government borrowing. We would not have been so ideologically committed to PPPs as the means of delivering on the national development plan while cutting Exchequer capital spending.

It is rather revealing how slow the private sector has been to date in taking up the PPP opportunities. Is it waiting in the wings until the State is over the barrel and it comes to the point where it would be offered the best terms possible to get stalled projects up and running? It is the failure of the promise to deliver on PPPs which motivates this Bill. For that reason we must be concerned that the new agency will see its role as breaking that log jam. I wonder if other forms of funding will really be considered. The Bill states that Departments will be forced to refer big projects to the agency and I wonder if that provision will be enforceable or if it is merely another time-wasting device.

The accumulation of so much off-balance sheet debt is worrying. If there is no effective transfer of financial risk, PPPs will result in a build-up of a large stock of potential liabilities for the State. The European Commission is putting some breaks on some of these crackpot ideas. The proposals in the Bill are resting on the expectation that EUROSTAT will qualify all these as being off-balance sheet. The officials in EUROSTAT and those in the financial markets will read the report of this debate and I believe they will react accordingly.

In relation to some of the details of the Bill I speak with some professional experience of management and accountancy. The board of this agency is to consist of a chairperson plus four members. This will be a re-run of the unfortunate National Pensions Reserve Fund Commission with private sector people from the investment and bond markets and a managing director of a recently unsuccessful private sector company which had formerly been successful. It is a totally conservative set-up. With the agreement of the board and by diktat, €1billion a year will be invested in projects and equity markets from Hong Kong to New York. They are so ideologically driven that they have not given any thought to investing in Irish projects. There is no indication in the Bill that the agency will be able to establish rates of return which will allow the national pension reserve fund to invest in our infrastructure. The board is small in number and, like the pensions board, it will be confined to a particular type of individual from the private sector. I can tell the Minister of State for free rather than at €2,500 a day what the board's advice will be and any accountant or economist could do the same for free.

The accountability provisions in the Bill are a disgrace and are designed to occlude. The basic reporting requirement is the production of one annual report six months in arrears. In terms of good management and of any serious examination of the work of the agency, that is equivalent to accounting archaeology. It will mean trying to find out more than a year and a half after the event was committed by the agency and that is not satisfactory.

A series of sections in the Bill are designed to provide an ethical framework for the members of the board but tied up in the ethical framework is a desire for secrecy. It would be easier for the board members to sign the Official Secrets Act. If a scheme turns out to be dreadful after it has been approved, there is no way of answering questions about it for up to two years afterwards when it eventually gets to the PAC. It is a shame and a disgrace.

I welcome the opportunity to speak about this Bill. The Bill is quite shoddy in structure and most questionable in a number of areas. It is completely deficient in relation to public accountability. I have only a short amount of speaking time so I will pose some questions which I hope the Minister will answer in his reply. The Minister speaks about getting value for money but there is not the slightest concession towards social accounting in this legislation. I attended a presentation in Galway by the PPP section of the Department of Finance and it was interesting to listen to the response of the builders who were present. I see no evidence of any element of social accounting in relation to hospitals, schools or anything which will ultimately be consumed as a public service. The public are written out of the legislation.

The Bill is badly drafted in a number of ways and the Minister exposes this in his rather extraordinary speech. He mentions the structure of the taking of advice. He suggests that the Minister for Finance will have a guiding role and, therefore, authority can be delegated to the Accounting Officer. I believe that this is in flagrant violation of the Ministers and Secretaries Act. The line Minister in any one of the areas will not have the responsibility in the Dáil and will not have the capacity to implement policy decided by this House or put before the electorate by way of mandate. This is quite extraordinary but it does not surprise me.

Deputies Burton and Richard Bruton have referred to another issue in relation to projects. Deputy Burton questioned the position in relation to the ongoing guarantees that are required for a project that is delivered for public use. The extraordinary mechanism for establishing a company which will avoid a State guarantee creates the capacity for something to be brought into being for the use and benefit of the public where there is no guarantee for its continuance. There is not the slightest intention of seeking any social justification for a project and a project with a social impact has no guarantee of its continued existence.

All this is on the basis of enabling investment to take place from private sources for which the profit is guaranteed, the capital acquisition and value over a period of time is doubly guaranteed and there is no risk taken whatsoever. This should not surprise anybody in this House. Looking at the capital formation in the State for several years and the requirements of those parts of the national development plan that have a social impact, one notes the manner in which the resources of this State have gone into speculative activity. It is for another day to look at the consequences this has had in relation to housing, land prices and so on.

The accountability provisions of this Bill are seriously deficient and they are exactly the ones that have come in for criticism in Britain. The economics are highly questionable. I cannot understand for the life of me why the penny has not dropped yet about the idea of borrowing at a higher rate than the yield one is getting from public funds that are invested in future pension provision. Our failure to fund urgently needed public expenditure is an absolute disgrace.

The Minister fails to justify many of the statements he made in his speech. Regarding the provision of advice, he claims that "PPP projects are complex, requiring expert technical, legal and financial advice." What is the nature of the financial complexity? What is our experience in relation to what is being provided in this area? He goes on: "A centrally resourced expert advisory service to all State authorities would be more economic than employing experts in each of these areas in every procuring authority, including the local authorities." Where is the evidence for that? It is a gratuitous insult to Members of the public service.

I believe in something much more simple but more democratic – that political parties go to the public with their proposals, they get a mandate from the public and they form a Government. Ministers are appointed who take responsibility for the delivery of a programme and they are accountable in this House and to the public. This Bill flies in the totally opposite direction in relation to what is necessary for the public.

Then there are the guidelines whereby projects would be evaluated when they have come back for final decision by the Department of Finance. The Minister has the neck to stand up in this House and suggest that he will consult other Ministers before the guidelines are issued, but why are the guidelines not here today? Is it because the Minister for Finance does not have the courage to stand up and say that there will be no social consideration of projects whatsoever? The Minister asserts that the NDFA will help to maximise value for money by identifying the best financing packages, but on what criteria? This whole notion is mystifying. The NDFA, financing itself, will be financed by a Government guarantee that is fairly conventional, but this does not run on in relation to any guarantee to the public for anything for which they might be dependent.

Then there is the notion that this is a way of delivering plans without coming under the guidelines of the stability pact. Why does the Minister not have the courage to suggest that we deliberate openly in this House on how we will provide the investment needed to deliver aspects of the national development plan? It would have been much more honest to re-prioritise and change the national development plan, giving priority to those parts of it which can be best developed.

There is a rather arrogant assertion at the very beginning of the Minister's speech. He tells us that "The Bill before the House is an integral element in the Government's determination to ensure that all available sources of funding are utilised for infrastructural projects, including private finance". The Minister for Finance will become the Minister of the six budgets in a few weeks' time – he has suggested combining them all into a large volume which we will be able to read. When the history of this period is written, it will be concluded that he has had the effect of driving available capital into the most speculative usages.

Consider the housing infrastructure in this country. People will not need to invest in vital, socially beneficial projects because they can get a much higher yield from speculative projects. On the other hand, he has insisted on all sorts of transfers of a regressive kind. Much more importantly, he will not discuss in this House the assumptions upon which this new proposal is being made. It is so obvious that everybody is asking him the question, why was the National Treasury Management Agency not used if this is what he wanted? Why bring another quango into existence?

When Members of this House ask about different projects in our constituencies we are told, for example, that "this is a matter for the NRA". One can imagine the situation now, when yet another quango is in existence and making decisions on vital infrastructure that is needed not only for economic benefit but for social benefit and for citizenship. The Bill is based upon bad economics, it is anti-public service and anti-public welfare, it is about conferring profit without risk to people who have a bad record, it is dubious in the assertions it makes about financial competence and it is the most disgraceful insult to the democratic process. It removes accountability from this House and from Ministers and it suggests that the Minister for Finance will dream up guidelines after we have enacted this legislation, while in the meantime we are asked to pass it on Second Stage. It should be opposed and should be voted down on Second Stage because it is so flawed it is not capable of amendment on Committee Stage.

I welcome this Bill as a valuable contribution to the expeditious and cost-efficient completion of priority infrastructure projects, particularly in areas of economic disadvantage. This will lead to fundamental and lasting change for communities across the length and breadth of our country. Among the proposed functions of the new National Development Finance Agency is the raising of finance for NDP projects, including the financing of public private partnerships where this would be more cost effective than private funding.

Enabling the private sector to invest directly in infrastructural projects will considerably reduce the drain on the public purse. As the private sector operates on a commercial basis, efficiency will also improve, or so the story goes. PPPs have virtually no track record and given that concession periods are usually at 15 to 20 years, there is to date virtually no PPP project that has completed all stages of the cycle according to original plans. On a cautionary note, several PPPs in the UK have already run into problems due to cost overruns, unrealistic price and income projections and legal disputes between private operators and the State.

There is, of course, no free lunch. The notion that PPP is a way of creating public infrastructure at little or no cost to the public purse is of course nothing more than wishful thinking. Nobody does anything for nothing, least of all the private sector, which clearly will only invest in a project if it is reasonably certain that it can recoup its investment as well as make adequate profit. When the investment is recouped through road tolls, sales or other tariffs, it is users, taxpayers and-or the State who ultimately pay the cost of the project. The provision of advice to State authorities, including Departments, to assist them in the evaluation of financial risks and costs will also be a function of the new agency.

Project risks include all factors or eventualities which cannot be definitively predicted or incorporated into project costings. The larger and more complex the project the greater the risks. In large-scale infrastructure projects, typical risks include unforeseen engineering problems, cost and time overruns, currency exchange variations, unreliable market and demand projections and environmental and social costs. Unless Govern ment agencies such as the new national development finance agency will assume a significant portion of project risks, the willingness of the private sector to participate will be in doubt.

Where public infrastructure is paid for by the State, the cost is distributed throughout society through various taxes based on income and profit while the benefits are distributed more evenly. The involvement of the private sector in public infrastructure leads to a form of flat taxation where only those who can afford to pay have access to the facility or service. This can result in reduced access to essential public facilities by those with the lowest capacity to pay, contributing to increased social inequality.

In the case of toll roads, there are instances where high toll charges have excluded low income users resulting in a public road system available only to the wealthy. In the case of foreign companies, allowing them to invest in or have control over major public infrastructure projects has serious implications in terms of national sovereignty and independence and it raises fundamental questions about the role of the State as exercised through the national development finance agency.

The ultimate question is who really benefits from PPPs? Will the NDFA determine what infrastructure is needed or who should shoulder the costs and risks involved in infrastructural development? Infrastructural projects usually respond to the needs of industry, the private sector and general economic growth and are justified on the theoretical promise that everyone will eventually benefit from economic growth and industrialisation.

I note the report states that it is expected that the benefits of the NDFA will include maximising value for money by identifying the best financial packages, applying commercial standards in terms of evaluating financial risks and costs for each project and centralising commercial expertise thereby reducing dependence on external consultants with the consequence cost savings. I welcome this if it occurs. I also note that section 5 will provide powers to enable the establishment of special purpose companies to give the NDFA additional options in raising moneys on the most beneficial terms for relevant projects. The section provides that the NDFA may form or cause to be formed an SPC. SPCs will be established for financing purposes only and they will not have a Government guarantee. The possible use of SPCs offers the benefit that the optimal financing structure can be put in place to raise money to invest in a project such as a bridge or tunnel with hard tolls where private sector financing packages are not sufficiently attractive.

In the words of the ancient Chinese saying, "Those who have suffered are not the beneficiaries, while those who have benefited are not the sufferers". I trust that the NDFA will ensure that this will not be the case.

Given this period of cutbacks and retrenchment, it is ironic that the Minister for Finance is suggesting the formation of another State agency. That act seems to run counter to everything for which he has claimed to stand in the past – the needless expense of another such agency, the added bureaucracy it involves and the fact that it will be another layer with which the political system and the citizen must deal. The Minister would probably argue that this new agency has been the centrepiece of the Fianna Fáil election manifesto and must be delivered on.

It is the only bit left.

That is the other argument. The Government has been selective in how it has chosen to implement its election manifesto and its now tattered programme for Government. This agency is being promoted because it is nothing less than a wheeze, it is a deception. It might be a deception founded on self-delusion caused by a Minister who has had the biggest budgetary surpluses for the longest period in the history of the State. It is self-deception on the part of the Minister for not recognising that large-scale borrowing must happen and that he is the person responsible for bringing this about. This Bill must be challenged because the Minister seemingly wants to act in contravention of international agreements we have entered into in terms of our debt-GDP ratio in relation to the Maastricht treaty. At the heart of this Bill is political deception.

The agency seems to be structured in such a way as to deny and avoid the essence of political accountability, for which all of us in this House have been elected to ensure. This agency will be given powers that will allow it to decide how information on its activities will be divulged. One of the provisions of the Bill is in relation to the prohibition on the giving of information. The definition of "confidential information" is whatever the board or Minister decides. Have we come to such a stage after the passage of progressive freedom of information legislation that we are putting into legislation caveats that allow members of the Government and appointees of Ministers to decide what is and what is not in the public interest? The clause to which I refer denies our right as public representatives to ask the appropriate questions.

The fact that this is an agency that has been given a guarantee in terms of its borrowing of €5 billion is something about which we have great concern. The fact that it is being promoted by a Government that has let public finances run riot gives us no confidence that this is a guarantee that will be honoured; it will more likely be used at its highest point at every possible opportunity.

In relation to the real focus of this agency – the protection and promotion of public private partnerships – it has been highlighted in the Chamber how ineffective this practice has been in the United Kingdom where such partnerships come under the title of "public finance initiatives". Such a policy has been adopted with gusto there in terms not only of infrastructural development, but increasingly in terms of the provision of schools and hospitals, and such developments have been seen to fail in practically every respect. Public private partnerships allow the Government to be provided with infrastructure but to pay the costs of its provision over a longer period at a greater cost to the taxpayer. Are we serving the interests of the taxpayer if all we are doing is creating a new sense of the "never never" in terms of the public accounts? We have been through that in the 1970s and 1980s and we do not need to return to it.

I can give Government Members who are present an example of how PPPs are working. At present, a contract exists to provide five new schools, one of which is in my constituency, Ballincollig community school. The contract will result in the demolition of the existing school structure and the provision of new school buildings which, under the concept, will be leased back classroom by classroom from a private company to the State.

That school has a perfectly usable and acceptable gymnasium which is being used by community groups and sporting organisations in that community of 15,000 people. Its facilities are being provided by the local school, as they should be, for derisory and pepper-corn type rents. A public private partnership will knock down this gymnasium, build a new one and make it subject to market forces. Use of that facility by the community will be determined by that private company at an economic value to be determined by it. Will the Government explain how the community benefits from such a policy? We know that the taxpayer does not benefit.

I share the reservations expressed by other speakers that this attempt at deception will be seen through by authorities in the European Union and the European Central Bank. The attempt to pretend we are not borrowing will be seen for what it is. Ultimately, we need a new discipline, other than that about which the Minister for Finance seems to be talking, to avoid borrowing on the scale proposed. The question we should be asking in relation to the national development plan is, why has this happened in this way given the small amount provided at such great cost? Why have there been cost overruns? Who has benefited from cost overruns? Why are we even thinking of putting in place a new system and agency when we have fundamental problems with how infrastructure is provided? It is another exercise in avoidance by the Government.

On these grounds as well as the lack of necessity for such an agency, the secretive nature which such an agency will adopt, the size of the guarantee, the fact that special companies will be established by this agency which will result in even less accountability and the experience we have had of PPPs to date, this agency should not come into existence and this Bill should not be enacted. It is my party's intention to oppose what is proposed by the Government at every interval.

The focus of this Bill is the need to fund the development of infrastructure in this State. It immediately raises the question, what have we to show for the prosperity of the Celtic tiger years? That is a question our children and future generations will ask. They will ask why, when the State had unprecedented wealth at its disposal, it fell so far short of providing the long neglected infrastructure that would provide the foundation for future economic development and social progress.

Despite the succession of budget surpluses and the exceptional flow of wealth through the economy over the past decade, our basic infrastructure is still deficient. The most obvious examples are roads, public transport and telecommunications but health care provision and acute hospital services are also an integral and important part of that basic infrastructure. There has been a failure to deliver on these, as promised under the national development plan. The Book of Estimates published last week confirms that failure and, I fear, will lead to even further delays. It is farcical that years after the publication of the national development plan, we still do not have a national spatial strategy, although it is promised shortly.

Nonetheless, this is probably one of the greatest ever examples of putting the cart before the horse. Development on this island is notoriously unbalanced with huge disparities between regions and, indeed, within regions. Neglected areas of the Border, midlands and west stand in stark contrast to the congested gridlock and overdeveloped regions of the east and south. This is the result of decades of bad planning or, worse, no planning at all.

For the people in neglected regions and for those socially and economically marginalised areas within – I emphasise – all regions, including parts of this city, throughout the east and in the southern region, this means, in effect, a lower standard of living and a poorer quality of life for them. Simply put, we do not have a level playing pitch and that must be recognised.

There is not a Deputy representing a constituency who cannot point to that reality within his or her own compass. In my constituency, we are bottom of the list on the National Roads Authority development programme. The Estimates cuts will push us down even further. As a direct result, the towns of Monaghan, Castleblayney and Carrickmacross will continue to suffer the negative economic effects of traffic congestion. The same will apply in the towns of Virginia, Cavan and Belturbet in County Cavan. As I said, I know this is reflected in the experience not only of my party colleagues in other constituencies but, I warrant, in the experience of all Deputies here.

Unlike some other parts of the island, we have virtually no public transport and we are bottom of the list in terms of telecommunications infrastructure development. It is clear that successive Governments, including this one, have not regarded public transport as an integral and vital part of our infrastructure. Public transport needs to be seen in exactly the same way as our roads network. It must be fully funded because it is absolutely essential for the economy to function.

We, in Sinn Féin, published our pre-budget submission this morning. We detailed our view of the vital infrastructure required for the provision of public transport. Public transport should no longer be treated as an add-on to Government transport policy. Only when we have a greatly improved public transport network will motorists be able to abandon their cars and take to bus and rail in significant enough numbers to reduce road accident deaths and reduce damage to the environment through pollution. Commuting times would also be reduced with a follow-on benefit to business and the economy generally.

In this regard, this morning we saw the evidence of the growing frustration and anger not only of the citizenry of this city but of many other major population centres throughout the jurisdiction where congestion on roads and gridlock is contributing not only to ill health, but to a poor economic reality for many people. The effect is right across the board and is something with which we must be prepared to grapple. Public transport is the key in a real and certain way.

We are opposed to any attempt to privatise public transport or our road network, either openly or by stealth through the use of so-called public private partnership. Efforts should be made to explore other methods of funding which ensure that the construction and maintenance of our infrastructure remains in public hands. I am concerned at the apparent over-reliance in this Bill on public private partnerships. Public transport must be funded to at least the level of our counterparts in Europe. Without proper funding, an efficient public transport system simply will not emerge. Privatisation or liberalisation, as it is sometimes described, of CIE is neither required nor desired, rather sustained and credible financial support for public transport must be the priority. We are opposed to the use of PPPs for road building. While we see planned development and proper maintenance of our road network as essential, especially outside Dublin, funding, if necessary, should be secured through borrowing rather than using the discredited PPP system. Borrowing has become a bad word, but the notion that borrowing is alien to good practice is far from the truth. There are much worse propositions entailed in the Government's current thinking and I urge a re-think.

We need only look at the massive over pricing in the construction industry which is costing the State many millions over the odds in major construction budgets. I no not have to name them out as they are self-evident. For example, during the debate on the Ansbacher accounts we called for an investigation into the monopoly position of Cement Roadstone Holdings. There is a monopoly in the area of cement and the concrete industry. Anti-competitive practices have squeezed smaller operators out of that business, often by questionable methods. They are in a position to fleece the State because of the reliance on them for so many projects. Will the national development finance agency be empowered to examine this issue and advise the Government accordingly? I hope that it would, because I see it as an important and integral part of the agency's brief.

We need to have the broadest possible definition of infrastructure, as set out in the national development plan. It is much more than roads, transport and telecommunications. The definition should also embrace social infrastructure, including – and I make no apology for naming it first – hospitals, schools and our greatly underdeveloped child care facilities. The Book of Estimates has imposed cuts in all these areas. I regard our stock of social housing as being part of infrastructure, yet it has been one of the most neglected sectors. The Government has relied totally on the market to address the housing needs of the people and it has failed miserably. Long-term investment is required to allow the State and local authorities to lead the way on housing. Some 54,000 household units are waiting for housing through our local authority systems. If we do not address it then we are storing up more social problems for the future.

It was recently mooted that the Government is considering the disposal of a number of landbanks and properties that are in public ownership, in order to fund the new agency. It would be an important and positive decision if the Government could ring-fence the moneys realised from the disposal of such properties, specifically for the provision of social housing. If there is the political will, it is realisable that 70% of the waiting list figures could be addressed in a two year period. Social housing is an integral part of infrastructure and it must be a priority to address the scandal of our growing waiting lists that are increasing by the order of some 8,000 annually. On the current projected figures it would take up to 40 years to address all of those currently on the lists and expected to come on to them in the near future. We must grapple with this problem and the NDFA provides the means. Let us translate this reserve of funds that can be drawn from public properties and lands and invest it in housing for people that need it. That would be a good start.

I look forward to teasing out the detail on the full implications of the Bill on Committee Stage. I have many concerns. Is this agency going to make a real difference or will it be another layer of bureaucracy, a barrier between Ministers and the public, and also a barrier between Members of this House and the Government which is responsible for delivering on the national development plan? It must not be that.

I am also very concerned that this agency could be used as an engine for driving the privatisation of our infrastructure. It must not be that either. In other countries this has proved to be disastrous, with the State having to come back in at huge costs after the private sector has made its profits, extracted its returns and then failed to maintain the infrastructure and the services in less well-off times. We have to learn the lessons, not only of our own experience, but of other jurisdictions, and apply them in terms of planning in the best way for the future.

I will reserve further comment for Committee Stage. I look forward to clarification of the many concerns and questions I have posed. I hope for a positive response to the proposals I have made, not least of all in regard to the ever-growing scandal of our housing waiting lists. An opportunity presents itself and I urge the Minister of State and his colleagues to grasp it.

I wish to share time with Deputy Peter Power.

Is that agreed? Agreed.

The purpose of the Bill is to establish the national development finance agency. Its creation is a necessary element in the Government's determination to address the country's infrastructural deficit. It is vital to ensure the continued ability of our economy to grow and develop. The creation of this agency was one of the proposals in the Fianna Fáil manifesto.

The functions of the NDFA will include the provision of advice to State authorities to help them evaluate the financial risks and costs of public investment projects. It will be involved in the assessment of optimal financing for public projects and, in certain circumstances, it will raise finance for public investment projects and the creation of special purpose companies. The NDFA will be State guaranteed but the special purpose companies will not.

The agency will help to maximise value for money for the Exchequer by identifying the best financial packages and applying commercial standards in terms of evaluating financial risks and costs for each project. The projects involved will include infrastructural projects and programmes of projects under the national development plan. Of particular importance will be the role the agency will play in the underpinning of public private partnerships.

PPPs are partnerships between the public sector and the private sector for the purpose of designing, planning, financing, constructing and-or operating projects which would be regarded traditionally as falling within the remit of the public sector. Infrastructural projects such as roads and bridges are prime examples. PPPs are the way forward. It is a common sense approach that should be supported by everyone, so as not to deprive the country of future development. PPPs offer accelerated delivery of priority economic infrastructure projects under the national development plan. They offer improved value for money for the State and the provision of quality public services. Currently, there are in excess of 40 PPP projects at different stages of procurement. They are a recognition that the public and private sectors have experience and skills in dealing with particular situations and they aim to tap into these and to allocate project risks to the party best able to manage them. In addition, outside the national development plan metro procurement is being explored as a public private partnership.

The PPP process is supported by unions, employers and the construction industry. The aim is to maximise the contribution of PPPs consistent with the principles of efficiency and best value for money taking account of economic, social and environmental objectives. As part of the social partnership approach to systematic development of PPP the Minister for Finance launched the framework for public private partnership on 1 November 2001. This fulfils a requirement in the Programme for Prosperity and Fairness to develop a clear framework to assess the appropriateness of PPP for infrastructural projects and guide their implementation, taking into account the wider economic, social and environmental objectives that should guide infrastructural development, irrespective of the procurement method followed.

Information seminars form part of the nation-wide PPP communications strategy and are held by the PPP unit in the Department of Finance together with representation of each of these key stake holders and they offer an opportunity for discussion and debate on issues relating to PPP. Following the national launch of the framework in Dublin, seminars were held in Cork, Waterford, Athlone and Galway. Public private partnership will form an increasing part of the tool kit of public sector procurement as familiarity with the concept grows and we make further progress. I commend the Bill to the House.

I thank Deputy Kelly for sharing time. I have private sector experience of the funding of major infrastructural projects through PPP and I have listened with interest to the various funding models proposed by Opposition Members to roll out the national development plan, which all of us agree is vitally necessary for the development of the country. The Bill recognises the new realities of the delivery of major infrastructural projects, which are massive in scale, international in nature and highly sophisticated in terms of finance.

Gone are the days when it was decided to build a road from A to B, the Government cheque book was produced and off we went. Previous speakers have advocated going down that road but would be to live in the past. That is not the economic reality. We tried this previously and billions of pounds were borrowed—

Quangos are the reality.

I will refer later to the Deputy's so-called quangos.

Acting Chairman

Deputy Power, without interruption.

The legislation also recognises a fundamental point, which has been missed by previous speakers.

The fundamental point is the Government is bankrupt.

Infrastructural projects must be paid for by the taxpayer or through long-term borrowing.

The Government should have thought of that last year.

We went down that road previously. The only way to deliver major infrastructural projects is to engage with those who have the necessary finance, expertise, efficiency and experience.

That would mean guaranteed returns at the cost of the taxpayer.

The Deputy should allow me to develop my argument before he criticises it.

Acting Chairman

The Deputy, without interruption, please.

The national development plan is vast and involves a cost of €40 billion.

Exchequer finances have been shredded.

The Labour Party is suggesting that the NDP can be completed by getting out the Government cheque book and borrowing the necessary money. Its members are living in the dark ages. It has been done previously and we will not go down that road again.

I do not agree with Deputy Ó Caoláin that borrowing is a dirty word. There is merit in borrowing for suitable infrastructural projects.

The Deputy would want to tell that to the Minister for Finance.

Deputy McCreevy will need a helicopter to take him to Kildare by the time he is finished.

The scale of the projects involved cannot be encompassed by borrowing, as that would be contrary to the Stability and Growth Pact. The new agency is an imaginative and innovative way to get around funding problems.

Like Enron and Worldcom.

Deputy Richard Bruton made the valid point that at some stage there may well be merit in going back to Europe to re-negotiate the Stability and Growth Pact. However, in the context of the national development plan we must work within the rules that have been laid down in the plan.

I had the opportunity to go to Spain on vacation with my family during the summer. I travelled for 80 kilometres on the best road on which I have ever driven – the type of road we aspire to have here – at a cost of €2.97. It was some of the best money I ever spent.

A socialist Government built that road.

Private sector finance had a major input into the project. However, the Labour Party and its ilk do not want such infrastructural projects undertaken.

Yes, we do. The Deputy's party has been in Government for 60 years. Why did it not undertake these projects?

Last week, Deputy Burton talked incessantly about the traffic problems morning, noon and night. Last Thursday, I would have gladly paid €10 to travel on the motorway been Dublin and Limerick if I had been able to.

The Deputy's party was in Government for 60 years and did nothing.

We have done plenty. We have a good record.

Deputy Power could not get out of Dublin last Thursday.

Deputy Stagg stated he could not get to his constituency. Tolling involves a modest investment and a modest charge.

Acting Chairman

Allow the Deputy to continue.

He is exhausted.

He has travel sickness.

I bring private sector experience to the debate but, unfortunately, my Labour Party colleagues bring no such experience.

We certainly can.

We can discuss the detail on Committee Stage.

The Deputy should watch his back. His marker and heavyweight constituency colleague has entered the Chamber.

I always watch my back. We cannot deliver the infrastructural projects to which we aspire by borrowing €40 billion. The Labour Party tried and failed previously.

No, Fianna Fáil failed miserably.

Labour almost sold this country down the Swanee in its vain attempt to build infrastructure.

Fianna Fáil has been in power for 60 years and has done nothing.

This legislation attempts to bring an imaginative and innovative approach to funding projects and I commend it to the House.

The biggest problem facing those who travel to Dublin from the Louth-Meath direction is the lack of proper park and ride facilities because they cannot get into the city. Under this proposal, when projects are selected, it would make sense to pick a number of sites on the periphery of the city so that those who do not live near bus or train stations can avail of parking. A great deal of money has been invested in the national development plan to improve rail links. Bridges along the line to the North were recently raised but if this element of the NDP had been properly thought out, these bridges would have been raised sufficiently to increase train capacity by 40%. Government plans, including the NDP, have not been thought out properly and one of the roles of the proposed agency should be to research the long-term needs of the projects it selects, particularly in terms of rail transport.

Debate adjourned.