Enda Kenny
Question:1 Mr. Kenny asked the Taoiseach the outcome of the most recent meeting of the cross-departmental team on infrastructure and public private partnerships; and if he will make a statement on the matter. [7866/03]
Ceisteanna – Questions (Resumed). - National Development Plan.
Joe Higgins
Question:2 Mr. J. Higgins asked the Taoiseach if he will report on the recent meeting of the cross-departmental team on infrastructure and public private partnerships. [8992/03]
Trevor Sargent
Question:3 Mr. Sargent asked the Taoiseach if he will report on the outcome of the recent meeting of the cross-departmental team on infrastructure and public private partnerships; and if he will make a statement on the matter. [11095/03]
Enda Kenny
Question:4 Mr. Kenny asked the Taoiseach if he will report on the recent activities of the NDP communications strategy group; and if he will make a statement on the matter. [11471/03]
Joe Higgins
Question:5 Mr. J. Higgins asked the Taoiseach the progress made by the cross-departmental team on infrastructure and public private partnerships; and if he will make a statement on the matter. [11582/03]
Pat Rabbitte
Question:6 Mr. Rabbitte asked the Taoiseach if he will make a statement on the recent work of the cross-departmental team on infrastructure and public private partnerships. [11603/03]
I propose to take Questions Nos. 1 to 6, inclusive, together.
The primary role of the cross-departmental team on housing, infrastructure and PPPs is supporting a Cabinet committee in its key task of providing a strong central guide and focus for the delivery of key national infrastructure, especially under the NDP. The team usually meets once a month, with the most recent meeting taking place on 16 April. That meeting was mainly focused on the key contexts that will set the agenda for the mid-term review of the NDP – namely, issues around priorities and finance, as well as legal considerations. The work of the Cabinet committee and the team is supported by an NDP communications strategy group, involving key delivery Departments and agencies.
Among the key achievements and activities of the group are the establishment of an NDP-CSF information unit under the Department of Finance to lead an information campaign; the dissemination of information on NDP investment, as required under an EU regulation, through such mechanisms as regional information campaigns, a dedicated website, the NDP annual report and the In Progress newsletter launched recently; the development of newspaper supplements and advertorials in the main national dailies; and the commissioning by the NDP-CSF information office of public awareness research which indicated that the general public want to know more about the NDP and, in particular, what is happening in their local areas.
The communications strategy group will continue with its work over the remaining life of the NDP.
Given that the national development plan is well behind schedule and over budget, what changes has the committee made to bring costs under control? Why does it cost 12 times more to dig a hole in Dublin than in America and six times more than in Spain? The Minister for Transport has announced massive programmes in recent months but he has been told by his colleague, the Minister for Finance, not to submit any more because there is no money for them. What are they at in this regard? Why has there been an overspend on roads in the east while the BMW roads programme falls way behind? Has the committee examined this issue? What changes, if any, has it made to bring inflation under control in this area so that the NDP can get back on track?
Public private partnerships seem to be in serious difficulty. The development of the Cork school of music, on which €11 million has been spent by architects to date, is at a halt. The project and five others involving schools that were to be built under the PPP scheme have been held up on the basis of a spurious claim by Brussels that this would interfere with the general level of Government spend. Was this matter discussed by the strategy group? Can we have an assurance that the PPP scheme will proceed? 2005 is the European year of culture. We have failed to provide adequate funding in this, the European Year of People with Disabilities. Cork will be without its school of music unless this matter is resolved. It also means that schools buildings projects, which are being lined up for inclusion under this scheme, are also stalled.
Was that element of the NDP discussed by the strategy group? Has it made recommendations? What is the problem with PPPs? Why has the spurious difficulty with Brussels not been sorted out? Will Cork have its school of music by 2005?
This group of questions does not deal with the Cork school of music or schools building projects. The five schools to which the Deputy referred have been built. The Cork school of music has not been built because of an enormous increase in costs. The argument over the PPPs, affects not just that, but other projects. In the EUROSTAT figures on the PPPs they take in the project on year one. That is not a sensible position and it is being debated by the Department of Finance and others. However, I cannot see why the figures are not spread out over a number of years. This relates to all projects and not only the Cork School of Music and schools building projects. That is the way EUROSTAT does it and that issue is being debated elsewhere.
Roads projects come under the committee. A total of 26 projects, involving 150 kilometres, have been completed, while 13 projects are due to be opened this year. Substantial planning and design work has been carried out on many other projects. The Deputy will be aware of the projects that are proceeding. An additional €209 million is being provided for the national roads programme, giving an overall budget of almost €1.3 billion.
A total of €300 million more than had been envisaged when the NDP was launched was invested over the first three years of the roads programme because value for money could not be achieved for a number of reasons. Construction price inflation reached 50% between the time the NDP was launched and the end of the third year of implementation. The roads evaluation report recently showed that outturn costs were an average of 38% in excess of tender prices. There was under-estimation initially because it was not possible to specify from the plans the land costs, project re-specification, which happened in many cases, and delays as a result of the foot and mouth disease outbreak and the IFA dispute.
We are achieving more realistic tender prices now and better value for money than was the case. I am not sure what is the percentage but it is nothing like the percentages between 2000 and 2002 when many resources were eaten up. However, this year because there is better value in the programme, a greater amount will be spent than in any of those years. The additional €209 million allocated in the budget will allow a number of significant projects to go ahead.
With regard to the PPP roads projects, the Minister had to come to the conclusion that the only way to finance them was to introduce toll charges. Each time a PPP road project is undertaken, there will be a toll on the road. The private sector is not interested otherwise. There has been examination of imaginative schemes for financing such projects and the National Development Finance Agency is making sure we get better value for money and examining the best financial mechanisms to achieve that. PPPs are useful for road projects, but overall, only one tenth of the investment in the roads programme comes from PPPs.
The Taoiseach has covered a range of issues. The first toll road opened in Britain last night – that road extends 27 miles around Birmingham – but the issue is one of choice. A person has the choice of driving on a toll road, which has three lanes either side. In many cases with toll roads in Ireland we do not have that choice but are forced to take the only route that exists.
The Taoiseach did not deal with the seriously escalated costs of tunnel digging here as against in America and Spain, which the Minister for Transport visited. In his reply will the Taoiseach inform us whether he has sorted out the business of the Luas crossing the most major intersection in the country at the Red Cow? It appears to be completely insane to do something like that.
The issue of the major infrastructural project in north Mayo was turned down by An Bord Pleanála last week. If it is not a gas terminal this week it may be a wind farm next week, an ESB line the following week, an incinerator the week after or some other major business. Every week one of these issues arises. Does the Taoiseach think consideration should be given to a situation where the Planning Appeals Board should present all the facts to the Cabinet and the Cabinet should take responsibility for major infrastructural decisions where there is national economic significance and the greater common good is at stake, taking into account people's legitimate concerns and interests? It appears as if hundreds of millions will be squandered over the next 20 years on debating issues as distinct from providing facilities for the overall development of the kind of country to which we all aspire.
On the road structure, I suggest the Deputy put down a question to the Minister. That is a long saga. I have listened to debate on it but I am not briefed enough to explain the design. It is a major issue and there has been much discussion on it.
The Deputy asked why the costs of tunnelling are different here. We are looking closely at that and sent some key officials to examine the matter because the estimate cost we got on the metro was €4.8 billion while a longer stretch in Barcelona in Spain cost under €1 billion, 22% of the cost. The issue is not simple but the officials have analysed the costs here. They have looked at all the issues from construction to the pipes, digging, tunnelling and boring. They are examining them together with the consultants' costs. There are many issues so there is not one answer.
Much of the issue is linked to the Deputy's second question. Environmental impact studies in Spain are different. The Spanish do not worry too much about them once they concern what is beneath the ground. I am not saying they do not take due care, that would be totally wrong, but they do not go through the long process.
There are 39 cracks in houses in Marino.
Mentioning Marino, we put the whole structure—
There are 39 cracks in the houses from tunnelling.
Allow the Taoiseach to continue.
As Deputy McGrath knows, I live in the parish—
Is that where the pension fund is, in Marino?
There are 39 cracks in houses there.
—and I have not noticed any cracks.
They could get wider.
On a more serious note, during construction in Spain and in other cities, boring takes place for 24 hours a day but here it lasts seven hours. Their procedure on coming to a conclusion on the planning process is entirely different. If it is a major infrastructural project any delay is referred to the person who makes the decision and the decision is made within 24 hours by one person.
This leads to the question of major projects. Let me preface this by saying that I think reasonable concerns, made by reasonable people, that influence projects should always be taken into account, but this is difficult. I am regularly faced with the position – I know that people in the future will be faced with the same position and maybe people faced it in the past but not to the same extent – where I have to explain the situation to somebody who has invested a lot in a project – in this case it was €150 million – and who has gone through a process that led from one stage to another, their work is useless and they must start again. It has not just happened in this case but in many others. It increasingly happens and it is difficult for people to understand why there is not a different system.
I know where the present system came from and I can understand it. Perhaps it was not a good idea that a politician made the final decision, not because a politician ever did anything wrong in this regard because a judgment has to be made. A politician might have some expertise in this area if he or she was perhaps an engineer but then again if he or she is a teacher or a farmer he or she may not have the knowledge. I would not put myself forward as having the technical knowledge. I would have to base my knowledge on judgment but I think our present position is unreasonable. It is unreasonable that people should go through several years on a project and then have to come back to the start and consider whether they should continue at all. It is unreasonable, particularly when there are not many of these people or companies around. I share Deputy Kenny's concern. We need to look at the issue.
I do not have a quick answer as to the best way to do this but some Ministers and the Attorney General are looking at aspects of the issue. Our rules are different from those of other countries. I do not say we should throw safety to the wind because I am sure if Prime Minister Aznar was here he would take offence if I said they do anything other than with the greatest safety. I am sure they take all that into account. It seems as if our system, all the way along through the local authority, the planning process, the judicial review, the High Court, the Supreme Court and, when that goes wrong, back to the start again, is not the way to proceed. I do not have a ready-made answer to the question but our process creates difficulty and thwarts investment.
It is creating difficulty in the international community because there is usually another place to go, particularly in terms of the next 20 years. I think Deputy Kenny would share that view. If we look at the capabilities of eastern Europe over the next 20 years there will be many places to go – for example, we have only to look at the wage rates. I looked at the costs recently in some of these areas in eastern Europe as against here and one can see where people will go. That issue has to be looked at because we must be able to give answers to these people.
Is the Taoiseach aware that the thinking he has just outlined is deeply worrying and undermining of the first consideration of public safety? Will the Taoiseach agree that in any project of public private partnership or otherwise, a mountain of potentially liquid peat is as much danger to the people of Mayo, whether the issue is passed by the Cabinet or by the normal processes that exist at present? It is reckless for him and Deputy Kenny to imply that we should cut corners and that anything underground, for example, should not be subject to environmental scrutiny. That is where our source of life, water, comes from. The people in Marino will tell him how important the matter is.
Is the Taoiseach aware that there is a widespread public perception among taxpayers that the public private partnership process is a mechanism to enrich the big shareholders of private companies while the State will carry the can in many cases if there are problems and the taxpayer will pay? Will the Taoiseach agree that this perception is justified, particularly regarding the 13 tolled road projects under the national development plan that are the subject of public private partnership? Does the Taoiseach agree that public private partnership is a highly inefficient way of funding these projects from the point of view of taxpayers who pay for half or more of the initial cost, continue to pay tolls indefinitely and then have to pay not just the full cost of the project, but also the profit for the big shareholders, which need not be in the equation as far as major public projects are concerned?
We have discussed the issue before and I hope the Taoiseach will have reflected on it in the meantime. Does he agree that replicating 13 times around the country the toll bridge in my constituency, which is an example of the most pervasive type of public private partnership in this State, namely, road structure projects, and is the greatest blockage to traffic in the Dublin area in which there are many blockages, and making taxpayers pay through the nose for others' profits in order that they can be held up for even longer is not the way to proceed?
I know Deputy Kenny would answer for himself, but I do not think he was advocating that we take short cuts any more than I was.
The implication was that the Cabinet would give the permission that was refused by—
The Deputy had an opportunity to speak.
What we are talking about is why the cost structure of one project is 400 times greater than in another country. We were merely analysing what happens. It is not a question of short cuts as I made absolutely clear that safety standards have to be followed. However, the reality is that if major projects are brought through a process that seems overly bureaucratic, too long and too difficult, the people who invest in such projects go elsewhere and one loses out in terms of jobs, investments and the opening up of land for other opportunities. With large projects, land masses are opened up for further development in the future, which normally proves to be a good rather than a bad thing. This does not mean abandoning laws or safety requirements. Unfortunately, we have a reputation for objecting to almost everything and then losing some of these major investments. It is a feature of the process here and a fact of life.
On Deputy Joe Higgins's point about PPPs, I made a number of these arguments previously. PPPs have a use which should not be over stated in the way some people would like. I disagree less with the Deputy on this point than on many others. Within the context of the comprehensive frameworks for public private partnerships negotiated by the Government and the social partners under the last partnership programme, an undertaking was given that in any new agreement the central PPP unit in the Department of Finance would develop public private partnerships in consultation with the social partners who represent the taxpayers affected by PPPs. It was also agreed that the unit would issue to State authorities detailed guidelines on all aspects of PPPs and how they work to ensure there would be transparency. These guidelines would provide a clear, consistent and coherent process for State authorities in developing projects under PPP arrangements. The Government will seek to minimise PPP bid costs by standardising contract forms, conditions and procedures at tender and construction stages and will issue guidelines to improve efficiency in the bid process.
To answer Deputy Joe Higgins's question, there is not sufficient scope to open up every project to PPPs and this would not be desirable. I understand that just three of the 13 projects on the list to which he referred have a public private partnership element. I am sure he will accept that the difficulty with not going down the road of public private partnerships for projects is that it lengthens completion times. We are spending €1.3 billion this year, an enormous amount of resources.
Our GDP spending on capital infrastructure projects is about twice the European average. We are trying to catch up by addressing our infrastructural deficits from the past. With the exception of Luxembourg, we spend much more than any other EU country. I do not see how any other country could spend substantially more than us in GDP terms over the next ten or 20 years. While it is lovely to talk about the possibility of removing the PPP element from the infrastructural programme, I do not believe we will be able to do so as it would mean large tracts of motorway standard road would not be built. If we did not proceed, the resources to fund the programme to catch up with other countries would not be available.
If I recall the figure correctly, the projects required to be done will cost about €15 billion. The National Roads Authority is ready to commence many of them. We are spending some €1.3 billion this year, which is more than €200 million more than last year. If one were to remove the PPP element, one would be saying to the country that we will not have some of the key motorways in the BMW region and other regions for a long time. That would not be a good idea.
On the same question and the contrast between the lag in the national development programme to which Deputy Kenny referred and the constant and outrageous escalation in building costs, where does the Taoiseach stand on the growth and stability pact? I almost choked on my cornflakes the other morning when I read a comment by the Tánaiste that Ireland is under-borrowed. I had to re-read it as I could not believe it given her position at the time of the election. She said we are under-borrowed and that the growth and stability pact would have to be revisited. Is this also the Taoiseach's view? Does he believe the time has come for such a step to be taken given the peculiar characteristics of our economy, to which he adverted, as compared to the other European Union member states?
I am a supporter of the growth and stability pact in so far as its principles apply to price stability and keeping low interest rates in EU economies. As regards the argument in favour of opening up the pact, which has been made by this country and, to various degrees, a number of other countries, I take a conservative view of how it this should be done. We have a borrowing rate of 34% of GDP – only Luxembourg's rate is lower – and an infrastructure deficit problem which did not arise in the current period. For the first time since the foundation of the State we have, in the past ten years or so, been able to amass resources to deal with our deficits, whether in terms of infrastructure or human capital.
Other countries follow the figures and guidelines we follow, but for the past 40 years they – Austria for example – have been able to spend on infrastructure. My objection is that the system is too regimental and no leeway is given to countries which have infrastructural problems. Why do we spend double the European average on infrastructure? Maybe the reason is that other countries do not need to spend so much because they already have substantial infrastructure. I would not agree to allow countries to do what they liked with regard to the growth and stability pact, as I know where we would end up, particularly now that more countries are joining the EU. In such circumstances, it would be very hard to maintain price stability, which is one of the great benefits to our economy.
However, where there are major, clearly defined infrastructural projects, for which one can prove a case in terms of economic benefit – countries should be required to do this – one should be allowed to go outside the terms of the pact. I think Deputy Rabbitte will accept my point that if a country with a low debt to GDP ratio, which is likely to remain almost unchanged for the next ten years or so – in our case it might increase a little over the next decade as we will return to deficits, but not significantly, except in the event of an unforeseen crisis along the way – is not allowed to spend money on capital projects, it will be inhibited from being able to grow its economy into the future. I do not understand that logic. The Deputy is saying we are all treated the same. I am of the view that there should be some leeway for fixed determined projects where one has to prove economic development. I do not share the view that it could be loosened up to a figure without having to prove a case. I argued this when I had the opportunity to meet the Commission. I also raised it recently with Commissioner Solbes whom I know from my days as Minister for Finance. I am trying to make that case.
I take it the Taoiseach does not agree with the Tánaiste that it should be let rip and that we are under-borrowed. As regards the serious points the Taoiseach made about the unique features of a country with an infrastructural deficit, compared to countries at the heart of Europe where that problem does not obtain, has he put forward any proposals about how exceptions might be made for specified capital projects in this jurisdiction? I do not know how one can say it is important to keep something like the growth and stability pact in place, perhaps even more important in terms of the accession countries while, at the same time, acknowledging that a country which has a good debt equity or debt:GNP ratio, as we have, should be permitted to borrow for certain essential capital projects which are constraining our economic progress into the future. How does one get that through a pact which is supposed to have application across the member states?
That is the debate. The Deputy has reiterated my points. I do not think it is impossible to build in a mechanism where the Commissioner responsible, in this case Commissioner Solbes, would be able to allow through a project on a case by case basis, based on the debt:GDP ratio. It was stated recently in a Commission document on the trans-European network projects that leeway should be given on such projects. The Commission has already moved its position. We cannot use the trans-European project criterion and, therefore, are restricted. Some of the countries which undertake a major trans-European project would be allowed to take that position. The date is not too far away, although it has not been reached yet, where a country such as Ireland should be able to make a case, not willy-nilly but in relation to fixed projects.
Will the Taoiseach rein in the Tánaiste?
We are looking at this on a long-term basis. Some 1,500 kilometres of roads will be required over the period ahead.
What about public transport?
Even going at double the European average, we would not catch up in 50 years. That is an unreasonable position.
How many of the 400 will be built?
I am told it will be 350.
I heard an important public servant say this morning that 115 would be built.
The Deputy should allow the Taoiseach to continue without interruption.
There is 150 on the 26 projects already done plus the 13 which are currently there.
I presume from the Taoiseach's comments that the officials from the Department of Finance have lost out. In the past he admitted that the Department of Finance was opposed to the public-private partnership process because it realised that it gave less value to the people. Perhaps the Taoiseach could clarify whether there is concern about road tolls. An article was written recently about the proposal from Europe to adopt a common electronic tolling system so people would not have to queue at tolling booths. Unfortunately, that could not apply in Ireland because our toll system is designed for the road builder, not for traffic management purposes. Has that concern been raised with the Taoiseach? Has he heard other concerns about the PPP process?
Does the Deputy have a question?
Teachers in a school in Cork, which is operating under the new PPP system, cannot lift a piece of chalk without looking at the contract which was originally signed with the operator and a child cannot play football on the pitch if it is not included in the contract. Far from being less bureaucratic, the PPP system is proving to be a bureaucratic nightmare. This will benefit private sector businessmen, not the students, road users or waste management companies which must work in the areas in which the PPP system will apply.
In any PPP project we have used – there have not been many – we sought to ensure we had the best technical expertise. As I stated earlier, the committee does not deal with PPPs in the school project area. I understood the five schools which were built under the PPP system were operating successfully. Perhaps they must comply with contracts, but I understood the system was working. I am not dealing with that issue.
Has the cross-departmental team looked seriously at alternatives to public-private partnerships for the funding of infrastructural development? Has it looked at the possibility of utilising the enormous funding that is available in the National Pension Reserve Fund, much of which has been sadly squandered on the stock exchanges of the world? Would it not be better to invest public moneys in infrastructural development to alleviate the choking effect on our economy and the halting of infrastructural development? Rather than paying incredible sums of money to private profiteers, would the Taoiseach agree that, if required, we could arrange for an index-linked repayment schedule to the national pensions reserve fund which would be a more appropriate means of using public funding rather than lining the pockets of those who see only an opportunity for themselves?
The answer to the Deputy's question is "yes". Every mechanism and every form of finance, such as the capital programme and everything outside it, including the national pensions reserve fund, have been considered. The National Development Finance Agency is involved in ensuring that the best advice is given in whatever way to the State authorities in terms of the delivery of infrastructural projects, evaluating the financial risks involved and accessing the optimum funding mechanisms – be they the Exchequer, private sources, the European Investment Bank or the National Development Finance Agency.
The Deputy homed in on the pension fund. There has been considerable involvement with the agency and the Minister for Finance. However, they would only be interested in big projects. They would not be interested in many smaller projects. What seemed like imaginative ways of financing most of them fell through and it came down to a few. We have gone through them all in the past year. It comes down in the end to capital projects. There are not many PPPs when one goes through them. There are some in the areas of water, waste, schools and road tolling. We get the best advice and value for what we do by using the National Development Finance Agency.
How big is big? What is the threshold?
I call Deputy Allen.
Very big. They would not have any interest in anything which might be several hundred million. One would need to be talking about large figures before they would have an interest.
Surely —
I have called Deputy Allen.
The Taoiseach referred to five schools which were built successfully using public private partnerships. When did Brussels raise concerns about using the PPP method for the Cork School of Music? What discussions are taking place—
We cannot discuss the Cork School of Music. That is more appropriate for the Minister for Education and Science.
When did Brussels raise concerns about PPPs and begin to insist that the total cost of such projects would have to be front-loaded in year one? What discussions are taking place with Brussels to address those concerns?
What steps has the Government taken to ensure that future public private partnership projects are not occasions for the further inflation of costs by some private sector participants? I am reminded of the Taoiseach spitting fire against profiteering by middlemen, learned professionals and others at the IMI conference in Killarney. I thought he was quoting from Karl Marx's Manifesto for a moment. How does he propose to translate that sentiment into management of the PPP system? Taxpayers can be held to ransom by this process.
As I said, the committee was not dealing with the Cork issue. I am not sure when EUROSTAT raised this matter but it was some considerable time ago.
Regarding increases in construction costs, whether PPPs or not, there was an increase of almost 50% in construction price inflation from the time of the launch of the national development plan to the end of the third year of its implementation, as I said earlier. Most projects in the roads programme were not PPPs but road evaluation shows that the actual outturn costs were an average of 38% in excess of tender prices. That has moderated now because of the economic situation of the past two years but public private partnerships did not drive those costs; it was the private market alone, dealing with contracts given by local authorities through the NRA.
Written Answers follow Adjournment Debate.