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Seanad Éireann debate -
Tuesday, 17 Dec 2002

Vol. 170 No. 24

National Development Finance Agency Bill, 2002: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

I am delighted to have the opportunity to present the National Development Finance Agency Bill, 2002 to the Seanad today.

The proposed National Development Finance Agency, NDFA, will assist in providing cost effective finance for priority infrastructure projects. It is a clear indication of the Government's commitment to the ongoing development of this country that the establishment of NDFA has been afforded top priority and that the legislation to give it statutory effect has been developed accordingly.

I will begin by sketching out the background to the establishment of the agency. In January this year I wrote to all Ministers asking them to bring forward public private partnership, PPP, projects as a matter of priority, to tackle our infrastructure deficit in a way that offers value for money for the taxpayer. At the same time, I approached the chief executive of the National Treasury Management Agency to ask what contribution that body could make to the PPP programme, given its acknowledged expertise in the financial markets. A third development at that time was the clear lesson emerging from the early pilot PPP projects concerning the need for specific financial expertise and advice to assist State authorities to obtain the best financing packages for infrastructure projects. This need applies not just for PPPs but for all major public investment projects.

The proposed National Development Finance Agency will meet this need. It will help to maximise value for money for the taxpayer, through the identification of the best financing packages and the application of commercial standards in terms of evaluating financial risks and costs for each project. NDFA will work through the NTMA. That agency will assign experts with relevant experience, for example in corporate finance and risk assessment, to carryout the necessary tasks.

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

The proposed agency will provide advice to State authorities in order to assist them in evaluating all available financial options for infrastructure projects. It will be part of the NDFA's role to advise State authorities, such as Government Departments and agencies, as to the appropriate financing structure and to evaluate proposals submitted by the private sector. As well as providing centralised expertise on financial proposals, NDFA will assist in identifying optimal financing arrangements for major infrastructural priorities. In certain circumstances NDFA will be able to raise finance for PPP projects where this would be more cost effective than private funding. NDFA may also raise finance for conventionally procured capital projects where there are clear benefits offsetting any increased cost of agency funding over Exchequer funding.

Where 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. In addition, the NDFA will be able to form special purpose companies under this legislation and will be able to receive funding and guarantees from the Minister. I am satisfied that this measure offers NDFA the necessary flexibility in discharging its functions. It is not envisaged that funding and guarantees will necessarily be given to all SPCs.

The Minister for Finance will have powers to make advances from the central fund to the new agency or a special purpose company. In addition, NDFA may advance money to an SPC. State authorities will also have powers to convey, assign or transfer land or other property, not including equity holdings, to a special purpose company formed by NDFA. The purpose of these powers is to ensure that there is sufficient latitude in the arrangements to allow NDFA as wide a range of financing options as possible, including the option of exploiting the potential of land and other State assets to generate resources to finance priority infrastructural projects.

In order to assess the optimal means of financing projects, NDFA will acquire the expertise to assess the relative merits of different project structures. Prospectuses and invitations to tender will make it clear that NDFA will be involved in assessing and advising on proposals and where appropriate will reserve the right of the relevant State authority to accept or reject any particular financing package or perhaps instead to utilise funds provided by NDFA. The objective will be to ensure overall best value for money and to encourage the maximum private sector involvement in financing projects. Continued private sector involvement will be a measure of success for NDFA.

Private sector involvement has been crucial to the development of the public private partnership programme. Working with the private and public sectors, my Department has developed the market from a point only two years ago where there were no projects under way to the position now where there are more than 40 projects at various stages of procurement in a wide range of areas, such as roads, environmental services – waste and waste water – education, health and transport. These areas of infrastructure are vital to underpinning our economic development.

A major achievement of the central PPP unit of my Department, working with the sectoral PPP units of other Departments, is the negotiation of refinancing clauses in PPP contracts. These clauses provide that where a private financing package is renegotiated after the contract has been signed, and savings achieved on the cost of finance, the savings will be shared with the public sector. When we first sought such provision in contracts, this was very unusual. Now other countries are trying to emulate the success of my Department in negotiating such facilities which I am sure will bring savings in years to come.

I am confident that NDFA will in future be able to deliver on the opportunities for cost savings that these innovative arrangements present. The development of PPPs in Ireland is not happening in isolation. This is a growing trend across developed market economies. PPPs represent the coming together of public services and private business. It is also consistent with and supportive of policies directed towards greater integration of economies within the European Union and across the wider global economy.

In Ireland, we have not had State monopolies in the provision of essential public services, such as health and education. These services have always been funded and provided by a mix of central and local government, private, voluntary and community-based organisations. Moreover, many local authority services have been delivered through contract arrangements with the private sector. PPPs are consistent with these longstanding practices.

International experience clearly shows that real benefits can be gained from PPPs. They can give better value for money compared to traditional procurement by transferring risks from the public to the private sector, they can deliver improved efficiency in the adoption of whole life costing of services and innovation in the design, building and operation of assets, and they can also provide better quality services through increased competition, incentives to higher standards and performance and an enhanced focus on the customer.

At the same time, PPPs can allow faster delivery of individual projects by linking the provision of the asset or service to payments, particularly in relation to more complex capital projects. A better utilisation of assets can be achieved through extended third party usage and can provide the context for better regulation as Government agencies focus on the role of regulator, planner and monitor rather than on day-to-day service provision.

While all international experience points to these benefits of increased value for money, the crucial element of successful PPPs is optimal risk transfer. By this I mean that a good PPP will ensure project risks are allocated to the party best able to manage them at least cost. Effective risk identification, assessment and allocation are crucial to achieving increased value for money for the Exchequer and taxpayers. For the private sector, risk will be commensurate with reward. The PPP programme will be developed to achieve the optimum balance of risk and reward and, drawing on the expertise of the NDFA, optimal financing packages for all projects, including PPPs.

The legislation provides that State authorities will be obliged to seek NDFA advice. However, it is most important to note that 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 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 an executive, capacity. The NDFA will also be consulted.

While the Bill will be discussed in detail by Members on Committee Stage, I will now outline its main provisions.

Section 1 is a standard provision which sets out the way in which the Bill and the terms used in it are to be interpreted.

Section 2 provides for the establishment of the National Development Finance Agency – which is referred to in the Bill as "the Agency"– as a body corporate on a day to be appointed by order by the Minister for Finance.

Section 3 sets out the functions of the agency which are to advise State authorities on the optimal means of financing major public investment projects in order to achieve value for money; to advance money 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 public investment projects; and to form companies, subject to section 5 of the Act, for the purpose of securing finance for public investment projects. It also provides that the agency will have any other powers necessary for the performance of its functions, including the power to engage consultants, advisers or other service providers. When carrying out its functions, the agency must comply with any guidelines or instructions the Minister for Finance may issue to it.

Section 4 provides that the advice of the agency must take into account any policy directions issued by the Minister for Finance to State authorities regarding financing of public investment projects as well as any detailed policy guidance in relation to the process, procedures and regulation generally of PPPs. The Minister must send a copy of every policy direction and policy guidance to the agency. Advice given by the agency may include advice about consultancy services across the range of technical expertise required to undertake such projects. The agency and the NTMA must at all times exercise due care, skill, prudence and diligence and act in the utmost good faith in the discharge of functions under the Act.

Section 5 provides that the agency can form special purpose companies, SPCs, in order to provide finance where this is necessary or expedient in order to discharge the agency's functions under the Act. The formation of any SPCs must have the prior written consent of the Minister in respect of each individual project.

Section 6 provides that the agency can borrow money in any currency subject to the consent of the Minister for Finance. The combined net aggregate of the principal of money raised and outstanding by the agency and any companies formed under section 5, and/or guaranteed by the Minister for Finance, cannot exceed €5 billion. The section also provides that the agency can engage in transactions of a normal banking nature with the Minister and any other persons in order to perform any of its functions.

Section 7 provides that the Minister for Finance may guarantee the due repayment, by the agency or any companies formed under section 5, of the principal of any money raised and/or the payment of interest on such money by the agency. The combined net aggregate of the principal of all money guaranteed and outstanding cannot exceed €5 billion. The Minister for Finance must give the Houses of the Oireachtas an annual statement with respect to each guarantee setting out particulars of the guarantee, payments made by him under the guarantee, the amount, if any, repaid to him on foot of such payments and the amount of the guarantee outstanding at the end of the year in question. Any money paid by the Minister for Finance under a guarantee must be repaid to the Minister by the agency or any company within two years from the date the money is advanced from the Central Fund.

Section 8 provides that State authorities, in accordance with any guidelines issued by the Minister for Finance, either under this section or section 3(3), shall seek the advice of the agency as soon as is practicable before undertaking any public investment projects. The guidelines to be issued under this section can include issues relating to the type of project, the size of the project, the stage of development of the project, and other relevant factors which might determine whether the agency's advice should be sought on a project.

Section 9 provides that a State authority can, subject to the consent of the Minister and the appropriate Minister, either for a consideration or not, transfer, convey or assign its interest in property owned or held by the State authority to a company formed under section 5. The purpose of this power is to allow the company to carry out its financing functions in relation to public investment projects. A State authority can attach terms and conditions as it considers appropriate to any such transfer, conveyance or assignment.

Section 10 provides that the Minister can advance money from the Central Fund to the agency or a company formed under section 5, subject to such terms and conditions as the Minister may determine. The aggregate of advances outstanding at any time cannot exceed €250 million. The agency can advance money to a company formed under section 5 subject to such terms and conditions as it may determine. The money advanced either by the agency or the Minister can be used to make an equity investment in such a company.

Section 11 provides that the agency shall perform its functions through the National Treasury Management Agency and that the National Treasury Management Act, 1990, be amended accordingly.

Section 12 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. Ordinary members will be appointed by the Minister for Finance for a term of office of five years. The remuneration and allowances for expenses and terms relating to holding of office for members of the board will be determined by the Minister for Finance at the time of the member's appointment.

The section also provides for the disqualification from becoming or continuing as a member of the board under certain specified circumstances and for the resignation or the removal from membership of the board in particular circumstances of an ordinary member of the board. It sets out how vacancies may be filled and allows for the re-appointment of an ordinary member of the board, subject to a maximum of two terms, if their membership expires by the passage of time. The Minister for Finance shall endeavour to ensure an equitable balance between men and women in the composition of the board where this is practicable and having regard to relevant experience.

Section 13 provides for the appointment by the board of the chief executive officer of the agency.

Section 14 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 15 provides that the agency should provide itself with a seal and sets out who may authenticate the seal. Judicial notice will be taken of the seal. It also lists who may enter into and execute any contract or instrument not requiring to be under seal.

Section 16 provides that a member of the board cannot be a a Member of either House of the Oireachtas or the European Parliament or a member of a local authority, vocational educational committee, health board, or the Eastern Regional Health Authority.

Section 17 provides that a member of the board, staff of the National Treasury Management Agency, 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 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.

Section 18 provides for a prohibition on unauthorised disclosure of confidential information. A person who contravenes these provisions shall be guilty of an offence and shall be liable to a fine or imprisonment or both.

Section 19 provides for a prohibition on unauthorised disclosure of confidential information and a person who contravenes this shall be guilty of an offence and liable to a fine or imprisonment or both.

Section 20 requires the agency to keep accounts in such form as may be determined by the Minister for Finance and specifies certain details in regard to borrowing and fundraising by the agency and its transfer to individual projects which must be included in the accounts. The accounts must be signed by the chief executive officer and the chairperson and be adopted by the board. They must be submitted to the Comptroller and Auditor General for audit no later than four months after the end of the financial year to which they relate. 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 amendment to the National Treasury Management Act, 1990, to the effect that the audited accounts of the NTMA shall note a record of expenses incurred by it in the exercise of its functions under the Bill. The chief executive officer and the chairperson must, when required, give evidence to the Committee of Public Accounts on specified matters. In the giving of evidence or the production or sending of documents to a committee, the chief executive officer and the chairperson cannot question or express an opinion on the merits or objectives of any policy of the board.

Section 21 provides that the agency will report to the Minister for Finance, not later than six months after the end of the financial year, in relation to its activities during the year. It is open to the Minister to make directions on the form of these reports and the matters to be included in them.

Section 22 provides for the amendment of the Schedule to the Act.

Section 23 provides for the amendment of section 54 of the Finance Act, 1970, to allow the Minister for Finance to engage in transactions of a normal banking nature with the NDFA and others, in connection with the performance by the NDFA of its borrowing functions, and for the better management of the indebtedness of the NDFA.

Section 24 provides for the amendment of the First Schedule to the National Treasury Management Agency Act, 1990. The amendment relates to section 5 of the 1990 Act, which provides that the Government may delegate to the NTMA, by order, functions specified in the First Schedule to that Act. The amendment provides for the delegation from the Minister for Finance to the NTMA of the power to enter into swaps, foreign exchange contracts, etc., for the purposes of managing the NDFA debt.

Section 25 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 26 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 or out of any surplus accruing to 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 27 provides for the Short Title to the Bill.

I want to emphasise that the new agency will have a critical role in developing the best means of financing public investment. The NDFA will provide a top level source of financial advice for sponsoring agencies such as Departments, local authorities or statutory bodies on the optimal means of financing major infrastructure projects. The agency will also provide ongoing financial advice as projects are procured and, in certain circumstances, will raise finance for projects. Our aim is to create a means of ensuring the delivery of value for money for the Exchequer by facilitating the best financial arrangements for projects, which, in turn, will assist in the delivery of key elements of the national development plan and other infrastructure priorities.

I commend the Bill to the House.

I welcome the Minister for Finance. I am not sure, but I believe this is his first visit to the House since I became a Senator.

No, I have been here before.

I welcome the Minister back to the House in that case.

I would like to express my reservations about the fact that such an important Bill is being shunted through the House this evening in such a speedy fashion. Senators could have expressed their views on all Stages of the Bill if the House's consideration of it had been spread out over a number of days. However, I am happy to discuss the National Development Finance Agency Bill, 2002.

I compliment the Minister on introducing this Bill, which shows that some of the promises made by the Government parties prior to the general election are being kept. Many other promises have been broken since the election. I agree that this is an important Bill, but it contains many flaws.

It has been widely accepted that the national development plan is in disarray. The plan's problems do not involve finance, but the delivery of the projects it contains. In recent weeks, it seems that urgent planned capital projects have been delayed or shelved, particularly in primary schools and third level institutions. No definite dates have been given for the projects to continue. There seems to be a view among many people that the national development plan will cost about €80 billion, which is a substantial amount of money. The interrupted flow of funding to the NDP has led to many difficulties for project managers.

The Minister has argued that the NDFA will become a centre of excellence for project financing, but I feel that we are tackling an aspect of the problem which should not be a priority. While the raising of finance is an issue, the real problem lies in the delivery on the ground, as demonstrated by the fact that projects are not being finished on time or are going way over their targeted budgets.

The difficulties with the NDP are not necessarily to be found in the area of raising finance. The National Roads Authority, the Railway Procurement Agency and the Housing Finance Agency have been established to garner finance in their various fields of interest, and a national waste management agency will probably be established soon. Why has the Minister not considered giving more power to those agencies to raise funds, instead of establishing a new quango as a further layer of bureaucracy? These agencies are unable to generate the funds they need to carry out the work they wish to do.

I emphasise that I agree with the laudable principle of public private partnerships. Many projects, however, do not have an income stream to attract private enterprise. A problem that is constantly mentioned by certain people in the context of PPPs and the NDP is that cheap public funding is being replaced by expensive private funding. It costs private businesses and individuals much more to deliver finance to a project than it costs the Government. This serious problem, which has not been addressed, places greater pressures on the private element of public private partnerships. The private sector may opt to fund public projects in limited circumstances only. Grave concerns have been expressed in relation to gathering evidence of the success, or otherwise, of PPPs. We have been told that about 40 PPP projects, including sewerage schemes, are in the pipeline, but we do not have any concrete evidence of how well they are working or will work in the future. We should not be asked to accept the new agency without being sure how PPPs are working.

There is a case to be made for Ireland to seek to renegotiate the EU stability pact. As a country with a low borrowing ratio, Ireland could quite legitimately press its claims with Europe for increased borrowing to finance improvements in its infrastructure, which is generally acknowledged to be of a poor standard. We should consider this matter before the National Development Finance Agency comes into being.

There are a number of other areas in the Bill about which I am concerned. It establishes State-owned companies which have the power to raise money without a State guarantee. Is this just a ploy to make the companies appear to be outside the public sector while will, in reality, remain within it? Is the Minister trying to fool the taxpayer? The Bill makes scant provision for either transparency or accountability within the SPCs. One thing about which we have learned in recent years is the demand for more transparency and accountability in the operation of Government agencies and State-sponsored companies.

Is it correct to establish an agency which will action as an adviser and as an executor of finance deals? This is one of the key problems with the legislation. Surely there would be an in-built tendency to recommend financial deals in which the agency plays an important role. Are we not effectively giving the agency a monopoly in the area of financing projects and allowing it to block the entry of private finance providers who might offer more competitive deals?

Why is it proposed to muzzle the agency from commenting on public policy which has only been half thought out? One area which comes to mind in this regard is the Taoiseach's pet project, Sports Campus Ireland. Will this slide in under the National Development Finance Agency? Why is the accountability of the new agency being circumscribed when we have suffered in the past from the lack of transparency and accountability?

The Minister and his Department have been silent on the question of using some of the resources of the national pension fund to finance capital projects. This is important and has been widely discussed inside and outside of the Houses. I acknowledge that the Minister's decision to set aside money for the future in the pension reserve fund was correct. However, there are infrastructural deficiencies and large amounts of money, which could have been invested for a gain here, have been invested outside the country. Over €1 billion of borrowed money has been channelled into foreign stock markets under the pension reserve fund at a time when there are large infrastructural problems.

While I agree with some parts of the Bill, it puts the cart before the horse to some extent. It has been poorly thought out. The Minister should reconsider it and come up with a more robust appraisal of the failure to deliver on the national development plan. It is for this that people are yearning. I oppose the Bill.

I warmly support the Bill and I welcome the Minister. The Bill is a well thought out initiative. The Minister provided the Government or official pedigree of the Bill, I would like to fill out the picture by giving its political pedigree.

The Bill was a major centrepiece of the Fianna Fáil manifesto in May of this year. The manifest proposed to establish, under the auspices of the NTMA, a new National Development Finance Agency to finance major public projects and evaluate all financing aspects of PPP projects. As Senator Phelan has already acknowledged, this is not an area in respect of which one talks about broken promises.

It is good to see one area where there are no broken promises.

The Senator is admitting that there are broken promises.

The Bill is the fulfilment of a key election pledge which became a major strategic section of the programme for Government. The Bill and the initiative reflect the importance that Fianna Fáil has attached for over 40 years to the development and improvement of our infrastructure. It reflects an interventionist and Government led approach, which refers back to the programme for economic expansion which began in the late ‘50s, the 1981 investment plan, The Way Forward – which was not implemented because we went into Opposition – and successive national development plans, of which the latest, dating from the year 2000, is by far the largest.

One notes that in the period 1974 to 1997, Exchequer capital spending rose from £1.1 billion to £1.6 billion. Even with a slight cutback, this year it stands at €5.4 million or £4.2 billion.

There was no Exchequer investment in railways until Fianna Fáil and the Leader, when she was Minister for Public Enterprise, changed the policy. This development must also be seen in the context of a long line of financial innovations. How many people were sceptical about the NTMA when it was established in 1990? Everyone now accepts that this body, which has cross-party support, has proved its worth. I recall sitting beside Charles Haughey as he explained the concept of the NTMA to journalists in the middle of the 1987 election. This initiative belongs with the IFSC, self-assessment, tax credits and a whole series of financial innovations.

Mr. Haughey was very innovative with finances.

Yes, and that has been worth billions of pounds to the country. It is not based on any starry-eyed approach to PPPs.

I read the debate on the Bill in the Lower House and it appears Deputy Burton does not understands the Department of Finance if she believes that it operates under the mantra "private sector good, public sector bad". There is a difficulty with PPPs, but, unless there is real risk involved, the public sector can borrow more cheaply than the private sector. The PPP process is part of a panoply of instruments and shows a determination to drive forward the national development programme and capital investment projects.

The Minister stressed the competitive aspect of the agency. He said that a good PPP would ensure that a project was allocated to the party best able to manage it at lowest cost and would be developed to achieve the optimum balance of risk and reward. One needs expertise and there have been many complaints, from all sides of the House, that the excessive use of consultants can be very expensive. The agency provides in-house expertise and the NTMA will act as a mentor.

Senator John Paul Phelan referred to other agencies such as the waste management agency or the Rail Procurement Agency, but these have primarily technical expertise such as, in the case of the former, what is the best or most economic form of waste management. They do not necessarily possess finance project expertise.

The Minister and the Government are being perfectly realistic. This is not a panacea and it will not get around the general Government borrowing requirement. As the Minister has stated, whether a particular project accepted will be a matter for assessment by EUROSTAT. Fortunately, the Government is not living dangerously or on the margins so a EUROSTAT decision on any project will not drive us over the limit.

I am surprised to see the Fine Gael Party – in the form of Deputy Richard Bruton in the Lower House and Senator Feighan here – suggest that we should be lift the limits of the growth and stability pact. That would not be a good idea. We are nowhere near those limits; it is not as if we are pressed up against the ceiling. Any attempt by us to lift the limits would have a bad effect on confidence. I suspect that if Europe were to do it, confidence in the European economy – with some of the larger countries' economies in serious difficulties – would not be improved. We have an adequate margin for manoeuvre and we should retain it. The purpose of this is to enable us to accelerate economically and socially useful projects. I doubt the value of a massive increase in the Exchequer borrowing requirement at a time when we have 4% to 5% inflation.

The National Development Finance Agency will be seen as another innovative and successful development initiative. Some people, particularly those in the Labour Party and perhaps for ideological reasons, do not seem to like the fudging of lines between private and public projects. I urge people not to be so conservative. This type of project has shown itself to be of real value. Some of the inspiration for this agency, which will be overseen by the Minister for Finance, comes from the social partners. During the term of office of the previous Government I had the pleasure of attending the Cabinet sub-committee on infrastructure, the major concern of which was, and remains, the driving forward of infrastructural investment. The agenda will now be enlarged by the national spatial strategy.

One matter that caught my attention was a public private partnership in waiting, the Cork School of Music. We would all like Cork to enjoy success as European City of Culture in 2005, so anything the Minister can do to push that forward would be appreciated. I congratulate him on this important legislation, which is one of the centrepieces of the work of the Government.

I wish to share time with Senator Browne.

An Leas-Chathaoirleach

The Senator only has six minutes.

Then I will take the six minutes and Senator Browne can have six on another occasion time.

One must look at the Bill against the backdrop of the national development plan or, as we should describe it due to the disappointments with which it has provided us, the "notional development plan". When the plan for 2000-06 was launched, it seemed to herald a new dawn for infrastructural projects for the entire country. What has emerged has been a disappointment, probably because, as the Minister said, we are entering difficult financial times. Looking at the recent Estimates and the Minister's projections for different Departments, one can see that there has been an all-round cutting of capital expenditure. This agency and the public private partnership council will attempt to fill this vacuum.

I would be interested in discovering the nature of the 40 public private partnerships in existence at present, in order that we might gain an idea of the spread of activity and the degree to which it can apply to "Ireland Inc.". While I am aware of successful projects involving second level education establishments being administered by a British company, Jarvis Projects, and the recent opening of a school in Tubbercurry, it would be interesting to see what the investor is getting out of it compared to what the State put in and the cost-benefit to the State on a long-term basis compared to what it would be if it had initiated the expenditure itself.

The National Development Plan 2000-2006 suffered because the jigsaw was not fully in place. The national spatial strategy emerged only recently, but it should have been drawn up in tandem with the national development plan. In terms of spreading investment in the direction of gateways and hubs, we have lost much valuable time – potentially a few years – whereas many of those infrastructural projects could have been dovetailed into those areas. Waterford has been designated as a gateway town, while its regional airport is under threat and may close down. From a transport point of view, surely that should be a vital cog in the area.

Infrastructural projects and public private partnership are buzzwords that have even been heard at county council meetings in recent times. It is regrettable that PPPs did not appear long ago. Every year, those of us who are members of local authorities see the same thing happening: a major sewerage scheme in the county, based on the national development plan, plus two small sewerage schemes. Lack of sewerage schemes is a major problem in rural Ireland. While a large amount of money is being spent on smaller communities in terms of landscaping them and building lovely stone walls and modern footpaths, the population is decreasing because of the lack of the essential component in the first instance, namely, a good sewerage scheme. As a result of a sewerage scheme being put in place, houses are built and the local school is then not under threat and the community knits together.

If one travels through rural areas, one will see the scale of this problem. Yesterday our county council debated the concept of going in a different direction in the future with regard to public private partnerships. I am sure other councils have done the same. If a developer wants to build in a rural area, he should be responsible for the sewerage, etc. We must be innovative if we want to improve things.

To a certain degree, the public private partnership is a concept from which many benefits can flow. The problem with the NDP in recent years has been the stop-go pace of development. I am glad we are analysing and scanning European Union directives, because the delay in important projects often seems crazy when the actual cost is quantified.

The Kildare bypass was delayed because of a rare snail that possibly nobody has even seen. The same thing occurred near Doonbeg in County Clare. As Chairman of the Committee on Public Accounts, I questioned the chairman of the National Roads Authority on the delay in the construction of the Kildare bypass. If I remember correctly, that delay increased costs by approximately €20 million. If directives such as this are a barrier to progress, we should be able to make the decision ourselves about whether a snail is rare.

I do not know whether the National Development Finance Agency is an additional body as such, but after the national spatial strategy and the national development plan, it is not worth moving on to bodies such as this to finance projects. The National Treasury Management Agency was investing abroad and losing money, in many cases, because of currency differentials. We must be innovative if we want a return from future infrastructural projects. As the Minister said, the national purse is empty. The Celtic tiger is not roaring as much as he did heretofore. What is left to finance infrastructural projects so that Ireland may advance in the future?

I welcome the Minister to the House. We have said for years that we suffer from an infrastructural deficit. We have failed to keep pace with the development of the economy, making ourselves less competitive and, in doing so, threatening the future of the economy. With that in mind, I welcome this initiative and the leadership the Government is showing in bringing it forward.

This is a policy that was agreed and put forward in the programme for Government and the Progressive Democrats support and endorse it. Delivering projects in the national development plan is one of the most important challenges facing this Government. Ireland is a dynamic, modern economy but we lack the infrastructure appropriate for such an economy. Our transport system falls well short of the standard prevailing in other European countries. Our rail and road networks need to be improved and those improvements will cost money. The Government is providing substantial funds to upgrade our rail and road systems and has done so over the last five years. If it were not for the forward thinking decisions made by Senator O'Rourke when Minister for Public Enterprise, our rail network would be crumbling into decay. Massive funding has also been poured into the national roads programme. Work is now under way in the development of a major network of inter-urban motorways linking Dublin with the major population centres around the State.

Our infrastructural needs are great and the funding required to meet them is massive. The Exchequer alone will be unable to bear the huge financial burden involved. We must explore other avenues, look at alternative sources of finance and examine new ways of doing business. That is where the National Development Finance Agency comes in. It is an initiative that will enable the Government to tap into new sources of finance, to involve the private sector in a very direct way in the provision of public infrastructure and it will enable the Government to deliver the projects contained in the national development plan much quicker than if it were to rely on Exchequer funding.

We have already seen how the private sector can contribute to the development of the national transport infrastructure. The Westlink and Eastlink bridges in Dublin were both developed as public private partnership projects several years ago. It is a pity so little has been done since then to involve the private sector in infrastructural development. A great opportunity was missed in the last ten years to bring private sector finance and expertise into the roads programme but it is better late than never.

The creation of the NDFA is a welcome development that provides for the first time a formal mechanism whereby the private sector can contribute to our national infrastructure. The very existence of the NDFA will send a signal to the private sector companies throughout Europe and the rest of the world that we are open for business and that we are looking for imaginative and innovative ways to finance a programme of infrastructural development.

Bringing the private sector into the provision of roads will involve the introduction of tolls on certain stretches of motorway and this has been politically controversial in the past. Motorists, however, will not object to paying a reasonable levy of tolls in return for the provision of a new motorway network. Tolling is widespread in Europe and there is no reason why Ireland should not follow best European practice.

We have come to realise that an infrastructural deficit not only affects quality of life but our economic future. We are willing to play our part in providing the proper development of infrastructure. For that reason alone we should support this initiative and not be afraid to bring the expertise of the private sector into the public stewardship of the State and our conducting business.

This process must not slow down the progress we have to make. When people ask for advice from the NDFA, it must offer it in a constructive manner and not delay projects that are so badly needed. When there is an infrastructural deficit and a need for investment in health and education, we should welcome the initiative. Public private partnerships have already worked in health and education. With this new way of thinking we should see the future development of the Cork School of Music, currently the subject of a public private partnership. The Minister must free any blockages to the partnership to make sure the project is complete when Cork becomes European City of Culture in 2005.

All sides of the House should welcome this Bill and this initiative if we are to address the deficit and fund projects in the most economic manner possible.

I welcome the Minister to the House. My life has not been the same for the past six months without our regular jousting in the other House but I am sure he is doing splendidly with my successor, Deputy Burton.

I do not see the need for this Bill. I read the Official Report of the debate in the other House and listened to Committee Stage but I am still not clear about its purpose. Either it is an effort to remove a serious amount of borrowing from balance sheets in an unaccountable way or it adds another layer of bureaucracy to the already extensive layers of bureaucracy we have. Either way, the Bill is wrong in principle or unnecessary in practice.

The genesis of the Bill is to be found in the Fianna Fáil manifesto. I was interested to hear the Minister say that he wrote to his colleagues earlier this year inviting their proposals for PPPs. He did not tell us the response of his colleagues. I suspect it was less positive than he might have wished. The NDFA is not the appropriate response.

At least part of this must lie in the Minister's well-known aversion to borrowing. He came into power in 1997 with a manifesto commitment to curtailing capital spending to increases of 5% per annum, a commitment he thankfully never met. It would have been wholly inappropriate in the circumstances but, as an indication of his thinking, it is instructive. Senator Mansergh was probably also involved.

The experience in Ireland of borrowing for capital purposes has, in fact, been positive. We have got into serious difficulty on occasion, not least between 1977 and 1981, when we borrowed extensively for current purposes. Most of our borrowing, however, for infrastructural investment has been quite positive. Evaluations carried out for EU co-financed projects indicate we got good value for money. My party does not, therefore, share the Minister's and the Government's aversion to borrowing and we have no difficulty with borrowing for the delivery of NDP projects into the future.

The difficulty with the national development plan has not been with funding, or even the question of whether it should be a mix of public and private. The difficulty has been with delivery. The Minister will be familiar with the FGS report which specifically focused on the roads projects. It makes interesting reading because it points up a variety of defects in the way we go about managing major infrastructural, particularly roads. Throughout the system, we have been slow in design, planning, route selection and particularly in cost management. The only way in which the likely cost of the motorway projects were guesstimated – with the benefit of hindsight it seems to have been a guesstimate – was by taking an average, per kilometre cost of roadway and simply multiplying it by the likely length of any given stretch of motorway. To put it another way, no realistic effort was made to estimate the likely cost of projects and it is hardly surprising there was a cost over-run. It is not sufficient to say, as the Taoiseach has said and the Minister has implied, that it all comes down to construction price inflation – it does not. There is a real deficit in terms of our ability to manage the cost of major infrastructure projects. I am not convinced that setting up the NDFA will improve matters.

I was interested in Senator Mansergh's comments on the Stability and Growth Pact, which probably reflect the Minister's thinking. I am opposed to the specific terms of what is simply a political agreement, as it has been since the start. It makes no sense, in the context of a developing economy such as Ireland's, that investment should be curtailed in the way currently prescribed by the pact. The faults of the pact are well known. It does not distinguish between current and capital spending or between countries that have an existing high level of debt and those that do not, and it should.

Ireland should be to the fore in welcoming Commissioner Solbes's comments of recent weeks. He has in mind a refinement of the pact rather than an abandonment of it, and that would not lead to any loss of confidence such as Senator Mansergh describes. Relatively few countries will be able to benefit – if that is the right word – from a refinement of the rules governing the currency, on the lines suggested by the Commissioner. Ireland is clearly one of those countries and it is common sense that we be allowed to borrow for capital purposes and not be required to fund a national development plan or major investments in infrastructure out of current revenues. We should have been saying this for several years past, when we did not need to borrow, but to say it now is to simply state the obvious. To state it in simple terms as President Prodi did, the Stability and Growth Pact is stupid and needs to be re-negotiated. It is just a political agreement, not a matter of sovereign commitment as the Minister has described it on occasion. It can and should be changed when it does not make sense.

My party is not opposed in principle to public private partnerships though it has been more sceptical than other parties, and rightly so. It has drawn on the experience of PFI in Britain to justify its scepticism. To cut to the bottom line, PPPs should not be used in areas where it would be inappropriate to introduce a profit motive and where there is not, as Senator Phelan rightly put it, an appropriate income stream. However, I have no problem with hard tolls, for example. They might not be appropriate in every case but I would have no difficulty, to avoid the pleasure of seeing too much of Cashel or Fermoy on the way to our second city, if I was required to pay a few euro extra. That needs to be decided on a case by case basis and I oppose the use of hard tolls on the M50 or city bypasses, for example, as people should be encouraged to use such roads and there should not be barriers to that. I have no problem with PPPs where there is a clearly defined income stream. However, to introduce a profit motive into the health service, even by the back door, is very difficult.

I do not understand what this Bill is about. I know the Minister has a problem with borrowing and perhaps he is trying to take it off the balance sheet. However, the initial justification offered of gathering together expertise in an advice centre, as it were, is a reasonable one. If that is all there is to it, I would have no problem supporting it. There are PPP units in individual Departments, although they are probably patchy in terms of experience as is the Minister's experience of them. There is a useful and well resourced unit in the Department of Finance which has been doing good work in dealing with the social partners in putting together a structure over recent years. Are those people to be taken from that Department and put into the new agency? Why is that new agency and its brass plate needed? Why not do this in the context of the NTMA rather than giving it a different corporate structure? Why is it necessary to set up special purpose companies, SPCs, which cause serious concern? Accountability will become diffuse and may get lost altogether.

I do not understand if it is intended to continue with PPP units in individual Departments or what the decision making process is in that regard. I will use a road project as an example. The NRA currently develops the project and decides in principle that it wants to do it, usually in conjunction with the Minister for the Environment and Local Government. That Minister eventually comes, as part of the Estimates process, to the Minister for Finance who either provides the money or not, and the project goes ahead or does not. At what point in this process is it necessary to go to the NDFA? Will that be before money is sought from the Minister for Finance as part of the Estimates process or at an earlier stage? Is this only being done because Departments have been slow to come up with suitable projects for PPPs? If that is the case, I am not sure this is the right way to do it. Departments need to be encouraged to be innovative in their thinking and I appreciate that they have not always been that. Nonetheless, I am not convinced that the NDFA is the right way to go.

I believe PPPs are useful in principle but we must be discriminating in the way they are approached, and careful to ensure there is accountability to this House with regard not just to the overall budget but to individual projects. That has already been lost by the use of the NRA and may become more diffuse if the NDFA is introduced. The Labour Party is opposed to this Bill largely because it is unnecessary but also because my party is suspicious of the motives of the Minister in introducing it.

I welcome the Minister to the House. Like Senator McDowell, I find it hard to understand what the Bill is about. I have gone into some detail with regard to public private partnerships. In some cases, I can see how such partnerships will work but not in all. If this Bill is passed, I hope that public private partnerships will only be used where there will be a positive gain.

How does the Minister envisage sewerage schemes and the provision of sewage treatment plants working under public private partnerships? This Bill seems to put a body in place to advise on the financing of public private partnerships. The financing of a such partnerships is only one aspect and, as Senator McDowell has said, if this Bill was only about advice with regard to financial matters, that would be fine. However, there are more aspects to public private partnerships than finance. The provision of a sewage treatment works to any medium-size town under a public private partnership gives rise to a situation where ratepayers must pay for part of the extension of the sewerage lines and for the capital upgrading of the sewage treatment works under the polluter pays principle. Under a public private partnership, the ratepayers of a town have not only to pay for the running costs of a project but also the capital costs because there is a clawback under the polluter pays principle. In cases such as this, these partnerships will raise the cost of providing those services throughout the country. There will be an inequitable system because there are sewerage systems in place for many years that are not a capital cost to ratepayers in some towns. On the other hand, ratepayers will have to pay a capital cost for new schemes in the town. One town will have a clear advantage in terms of sewage treatment works. It will be an inequitable system. It does not only apply to sewage treatment systems, but to the provision of water services, etc.

Like Senator McDowell and other speakers, I do not have a problem with the Bill if it relates only to the provision of financial expertise to public private partnerships. However, it does not seem feasible to set up a finance agency to do only that. It seems there is not much more to the Bill.

As regards the national spatial strategy, I have looked for a debate on several occasions on the BMW region and how it is coping financially compared to the rest of the country. That region is not getting its fair share of the cake. If the Bill is passed and this finance agency is established, and if the Minister is serious about the national spatial strategy, he should consider locating it in the BMW region.

I welcome the Minister to the House. I had the pleasure of meeting him recently at a function in Carlow. I am glad that everything in the Fianna Fáil manifesto has not been left out. Many of my friends and constituents in Carlow are still looking for the first-time buyer's grant and for a big increase in children's allowance. They are also frantically searching for the section in the manifesto which states that vehicle registration tax will be increased. However, they do not seem to be able to find it.

The Minister is popular and is seen as a straight talker.

If that is true, I must start worrying about myself.

The Minister talks a little too straight at times and that is a difficulty. However, he seems to get bogged down in detail. We seem to have created another layer of bureaucracy. I take comfort from the fact that Senator McDowell also finds the Bill confusing. I was completely baffled by it and I took time to listen to the debate. Are we adding yet one more layer of bureaucracy? No one can argue about the content the Bill. We all agree that we need proper management of our finances to ensure things work. However, how do things work?

Fianna Fáil has a great habit of announcing that something is coming and of believing that it has been achieved. Senator Minihan talked about Luas as if it had been completed, when that is not the case. It is two years behind schedule.

It will soon be completed.

The impression was given that it was completed.

I did not mention Luas. The Senator should listen to the debate. If he does not listen, he will not understand.

I listened to the debate.

Senator Minihan is not a member of Fianna Fáil.

An Leas-Chathaoirleach

Senator Browne, without interruption.

It is important to point out that the same system is already in operation in Montpelier. Much work will remain to be done even when the system is complete.

I do not know the purpose of special purpose companies. The Minister did not indicate in his speech how many or why such companies will be established. Will one be established in every county? I do not know the reason for them. Perhaps the Minister might clarify that.

I agree with Senator McDowell that public private partnerships have worked well in other countries in the past. However, we must be conscious of safety issues. We are all aware of the problems with the rail service in England. Companies tend to put profit before safety. We should study the English system carefully and learn from its errors.

We had a private briefing session this morning with the Department of Transport at which I raised the issue of tolling. That is a classic example of public private partnerships in action. Will the Minister consider abolishing car tax? Other countries which have tolling systems do not have car tax. It would be a gesture of goodwill to motorists.

Is this a time to put more cars on the road?

Unfortunately, people already have cars. Perhaps the Minister will consider giving back to the local authority a percentage of the money from tolls, rather than allowing it to disappear into one big central agency. That would generate goodwill in local communities. We are all hounded by people who oppose motorways and tolling systems. However, they might accept them if they thought car tax would be abolished and some of the tolls would be used for local roads. That might work, particularly given that the National Roads Authority is not putting money into non-national roads. Tolling is important if we want to improve our infrastructure.

I disagree with Senator Mansergh about the great track record of Fianna Fáil, which has been the dominant party in Government for the past 80 years. Unfortunately, the country's infrastructure is not good, so we must equate one with the other. We have a lot of work to do in that area.

A lot of progress has been made.

A lot of progress has been made, but to cite the Fianna Fáil election slogan, "A lot done, more to do".

It was a great slogan.

I must give Fianna Fáil credit because it was a lot better than the Fine Gael slogan.

Did an American consultant come up with that slogan?

We thought of it ourselves.

Perhaps the Minister might clarify some of the points I raised.

I thank the Members who spoke in this debate. I was impressed by their well-informed contributions. I hope it proves informative for those who follow the debate outside the House.

As I said on many occasions, the Bill is an important part of the Government's plan to address the country's infrastructural deficit. The Bill, when enacted, will establish a National Development Finance Agency which will endeavour to maximise value for money for the Exchequer in a number of ways, including through the identification of the optimal financing packages and the application of commercial standards as regards the evaluation of financial risk and costs for each project. The NDFA will add an important dimension to the financial advice and expertise through existing arrangements for developing infrastructure. It will not substitute or replace those arrangements.

Even with normal democratic arrangements, the Government will have overall responsibility for deciding social and economic issues and priorities. Responsibility for the initiation of projects, including PPP projects, for determining what projects will be prioritised and for individual project management will remain with the relevant Ministers and PPP units created in the particular sectors, such as the NRA for national roads and the RPA for railways.

The PPP unit of the Department of Finance has responsibility for leading, driving and co-ordinating PPPs in Ireland. Experts from the central unit have already made significant contributions to developing early pilot projects, to stimulating competitive markets for PPPs and for agreeing with the social partners a framework for PPPs. In addition, the central PPP unit has been instrumental in achieving PPP contracts which provide for the benefits of any private sector re-financing to be shared with the public sector. This has been lauded in the United Kingdom and elsewhere.

The PPP market has developed in recent years to a stage where there are now upwards of 40 PPP projects in procurement. The primary role of the Department of Finance's unit is the creation of a comprehensive body of guidance on all aspects of public private partnerships covering financial, legal, technical, human resource and process issues. This guidance will set the context within which the NDFA will function.

The NDFA will provide expert financial advice and, in some circumstances, it may provide finance. It will underpin and augment existing arrangements. It will not replace, supersede or duplicate these arrangements nor will it add another layer of bureaucracy. The National Development Finance Agency should achieve significant savings on project costs through negotiating optimal financing packages and reducing consultancy fees.

Senator Phelan asked what the benefits of the NDFA will be. It is expected that the benefits of the agency will include maximising value for money by helping State authorities avail of the best finance packages for capital projects being funded by non-Exchequer sources, applying commercial standards in terms of evaluating financial risk and cost for each project, underpinning the PPP approach to delivery of infrastructure and centralising commercial, including financial and legal, expertise thereby reducing dependence on external consultants with consequent savings.

Giving other bodies, such as the National Roads Authority or the Rail Procurement Agency, powers to raise project finance themselves will not achieve these benefits. As Senator Mansergh correctly said, these agencies have technical expertise but can not be expected to have the financial knowledge of the NDFA.

Senator Finucane and others mentioned infrastructure. The country is facing infrastructural deficits and it is important that these are addressed urgently and in a way that delivers value for money. With this in mind I wrote to all Ministers and to the NTMA earlier this year asking them to bring forward projects and proposals for tackling our infrastructural needs. At the same time I asked my officials to examine international developments and best practice in financing and structuring public investment projects, particularly public private partnerships. Finally, the experience gained from the early pilot PPP projects indicates that Departments and State authorities need specific expert advice to assist them in identifying the optimal financial packages for their projects.

Senators Finucane, Browne and others asked about the provisions in the Bill for special purpose companies. It is proposed that section 5 will provide powers to enable the establishment of special purpose companies, or SPCs, to give the NDFA additional options for raising moneys on the most beneficial terms for relevant projects. Section 5 now provides that the NDFA may itself form, or cause to be formed, an SPC. Special purpose companies are for financing purposes only and the consent of the Minister for Finance must be obtained in writing before each company is formed. Special purpose companies created under the legislation are not prevented from receiving funding and guarantees from the Minister. I am satisfied this is necessary to ensure that the NDFA has adequate flexibility in discharging its functions. It is not envisaged that functions and guarantees will be given to all special purpose companies. In practice, the power of the Minister to guarantee the debts of a special purpose company will not be used very often as it is likely a special purpose company will be used in instances where there are cash flows from user charges or tolls thereby obviating the need for such a guarantee. Nevertheless, it is considered prudent to include such a provision at this time.

The Minister for Finance has the power to make funds available to the NDFA on such terms as he or she considers appropriate. Should the NDFA or a company require funding at a time when market conditions are not optimal, the Minister will be able to provide interim funding. In other words, this provision will ensure that the NDFA or a company is not held hostage to the financial markets. Depending on Exchequer resources funds may be provided to such bodies on a longer term basis. This provision will prove most useful in enabling the Exchequer to top up or provide core funding for a project where there are hard tolls or user charges but not in sufficient quantity to service 100% private sector funding. In such an instance the Exchequer would provide, say, 20% funding and the company would seek to raise the balance based on the cash flow for the project and would allow, of course, for a Government guarantee.

The NDFA also has powers similar to those of the Minister already described. The concept is to provide for the Minister to channel money to a company via the NDFA and provide for the NDFA, with the approval of the Minister, to use its own resources to fund a company wholly or in part. In the event of the NDFA having a surplus at some time in the future it may be appropriate to use such moneys to fund new projects. Any new company formed would require share capital. This amendment gives the Minister and the NDFA power to contribute to such share capital, which is essential.

Special purpose companies offer the following benefits. First, the optimal financing structure can be put in place to raise the money to invest in projects such as bridges or tunnels with hard tolls where private sector financing packages are not sufficiently attractive. Second, a key concern to investors, the debt repayment capacity of the borrower and the risk that the cash flow may be diverted to other parties, 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 a special purpose company as a financing vehicle for the project. This special purpose company would raise the moneys for the project and would have priority rights for cash flows such as, for example, tolls. Such an SPC would not get involved in any other project and, therefore, investors would have more confidence that their investments would be repaid. In return the special purpose company should be able to raise the moneys on better terms, that is lower borrowing.

Special purpose companies have been used before. The NTMA formed a special purpose company in the late 1980s when the loan books of local authorities were sold off to raise money. A special purpose company was formed under the auspices of the NTMA through which the finance was raised. A SPC would be a limited company with normal memoranda and articles of association and its purpose – a road, bridge, tunnel or whatever – would be set out. The private sector might take, for example, 60% of the company and the NDFA would also take a part. This would allow the SPC to get the optimal financing arrangement for the project.

Senator Finucane asked about the PPP project comprising five post-primary schools. The Comptroller and Auditor General has already commenced a value for money audit of that project, which was the first PPP pilot scheme to reach financial closure. While we learned a great deal from the schools project there were problems, particularly in relation to the cost of private finance. The development of our proposals for the NDFA, with its emphasis on optimal financing structures and value for money, owes much to the evaluation we made of the schools PPP project and other early projects under the pilot programme.

Senator Mansergh, with his knowledge of history will know this better than me, but I believe Deputy Quinn was Minister for Finance when the special purpose company was used for the sale of the loan books. The company concerned was called Ulysses.

The State should always be the borrower who will get the most attractive terms. There is folklore to the effect that in the early years of the State a large company in Dublin – now a multinational company – lent money to the State. Only the very largest public companies could borrow at levels near to those available to the State. There are other advantages in managing a project by way of a public private partnership. In the case of the schools project, the schools were delivered on time and on budget to a higher specification. I have not seen any of the schools but I am told this by everyone concerned, Opposition Deputies and Senators included. The financial arrangements were more expensive than would have been available to the State. Six schools were to have taken part in the project and one school opted for the traditional approach and decided to wait its turn with the Department of Education and Science. The five schools have been built under the PPP and the sixth school is still in correspondence with the Department. It is likely to be so for some time – without giving away secrets about next year.

The financial package was undoubtedly quite expensive. When the NDFA is set up, the projects will be decided upon by the line Minister in the relevant Department or by an appropriate accounting officer under the equivalent delegated sanction. They will manage the project and use the expertise in their Department to decide what should be done. They will then be obliged to consult the NDFA and offer a financial arrangement. Having obtained the agency's advice, they will not be obliged to accept it. The NDFA may say it will be able to finance a project better than anyone else and that it will do it in a certain way. It will then be the responsibility of the line Minister and his or her Department to decide what route to take.

The NDFA will not be responsible for deciding whether projects goes ahead and will have nothing to do with assessing them. When the chief executive officer and chairman of the NDFA, on foot of its annual report, come before the committee each year, they will speak about the financing. They will not answer questions on whether it was a good idea to proceed with a particular project. For example, if, as stated on Committee Stage in the Dáil, we decided to build a Taj Mahal in Celbridge – which is near my home and that of Senator Walsh – it would cost thousands of billions of euro to do so. The Government would then be obliged to make a decision on whether to proceed and the NDFA would offer advice about the optimum financial arrangements. It would not be in a position to say it was a great idea, a bad idea, a Mickey mouse idea or whatever; it would offer advice on the best financial arrangements for the project. Common sense will, hopefully, prevail and the Taj Mahal will be built nearer to my home in Clane than to the home of Senator Walsh.

Apart from that, the NDFA will advise about finance. It will not act as a layer of bureaucracy designed to stop projects proceeding. Projects will take their normal place in the queue and Ministers in the relevant Departments will have to decide, in lieu of their total capital allocation, how matters will proceed.

For at least ten days after the launch of the Fianna Fáil manifesto earlier this year, much to the chagrin of many commentators and members of Opposition parties, we concentrated on the economy. A great deal of the debate took place at press conferences held at 9 a.m. or 10 a.m., which was much too early for some journalists to attend. Had they been present, they would not have made such outlandish comments during the past six months about what was or was not promised.

There was much debate during the campaign about the National Development Finance Agency and we produced charts which outlined the position for the next five years. Senator McDowell definitely saw these and the Labour Party produced similar charts dealing with finance, current spending, etc., for the next five years. One of our charts contained information about additional capital projects costing €2 billion a year for the next five years. I subtracted that €2 billion to get the Exchequer borrowing requirement, made an assumption that 50% would not qualify for the general Government balance and then added it back to arrive at the GGB percentage. Senator McDowell will remember this fact, which has been missed by most other people. The increase in current spending was in single digits for the five years outlined. When we announced it after the election everybody became upset.

The Government knew before the election.

The moral of the story is that, with the exception of various specialists, nobody listens during election campaigns; the people tend to be asleep and do not pay attention.

Cut back in year one and spend—

The Minister is very unfair to the journalists who were present.

The NDFA will provide advice about financial packages and, for those who believe differently, it will not act as another layer of bureaucracy. The sponsoring Department will be entitled to either accept or ignore the agency's advice.

Let us consider the example of a project in line with the overall schools building programme. It is likely the NDFA would state that it could provide a better financial package for such a project. In the instance to which I refer, the line Department was the Department of Education and Science which possesses all the details of the project in question and its officials could be questioned by members of the relevant committee, if necessary. Jarvis Limited ran the project, but the financial package was put in place by Barclays Bank which, naturally, would have sought a return on its investment. It is possible that, had it been in existence, the NDFA would have offered advice on alternative financial arrangements. That, in a nutshell, is the purpose of the NDFA.

The agency may occasionally become involved in providing finance to the relevant body. That is why, in the period between the Bill's publication and the Committee Stage debate in the Lower House, I came to the opinion that the restriction on not allowing the Minister for Finance to guarantee or provide funds was too restrictive. There may be an opportunity for the NDFA to provide finance when a particular SPC needs some kind of State guarantee or requires equity finance from the State. We allow for as much flexibility as possible, but this provision relates to finance only.

Why cannot it be done by the central unit of the Minister's Department?

The central unit in my Department, along with other Departments, advised that processes be put in train to do with the social partners, etc. It has to do with the management of a project and has nothing to do with the Department of Finance.

Why can the unit not provide it?

The Senator's colleague asked – this question was also discussed on Committee Stage in the Lower House – why not change the NTMA Act to allow that agency to operate in this area. The reason is that the NTMA would be at cross-purposes. The NTMA's job is to borrow money for the State at the lowest possible cost while the NDFA will try to obtain the best possible deal for a particular project.

Members also asked why money from the National Pensions Reserve Fund cannot be used for these projects. The answer is that it can be used. There is nothing in statute to prevent money from the National Pensions Reserve Fund being invested in any capital projects in the State. Such investment would be subject only to the normal rule that the optimal rate of return would be obtained. There has been a good deal of misinformation about the National Pensions Reserve Fund. The trustees of the fund – like any other pension fund trustees – can invest in any project they wish, but they must be satisfied that a particular project is not overly risky and that they will obtain a maximum rate of return on their investment. The National Pensions Reserve Fund was as near as I could have got at the time to a normal pension fund in terms of obtaining an optimal rate of return. I suggested many other ideas, but in the end I opted for that simple approach.

The purpose of the NDFA 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 national development plan and other infrastructure projects. Great care has been taken to ensure that best practice is being followed with regard to the structure, staffing and governance arrangements for the agency. The Bill imposes rigorous requirements regarding disclosure of interests and confidential information in relation to seeking to exert improper influence.

I again thank Members for their contributions and I commend the Bill to the House.

Question put.

Bohan, Eddie.Brady, Cyprian.Brennan, Michael.Callanan, Peter.Dardis, John.Feeney, Geraldine.Fitzgerald, Liam.Glynn, Camillus.Kenneally, Brendan.Kett, Tony.Kitt, Michael P.Leyden, Terry.Lydon, Don.MacSharry, Marc.Mansergh, Martin.

Minihan, John.Morrissey, Tom.Moylan, Pat.Norris, David.O'Brien, Francis.O'Rourke, Mary.Ó Murchú, Labhrás.Ormonde, Ann.Phelan, Kieran.Scanlon, Eamon.Walsh, Jim.Walsh, Kate.White, Mary M.Wilson, Diarmuid.


Bannon, James.Browne, Fergal.Burke, Paddy.Burke, Ulick.Coonan, Noel.Cummins, Maurice.Finucane, Michael.

Hayes, Brian.Henry, Mary.McDowell, Derek.Phelan, John.Terry, Sheila.Tuffy, Joanna.

Tellers: Tá, Senators Minihan and Moylan; Níl, Senators U. Burke and J. Phelan.
Question declared carried.

When is it proposed to take Committee Stage?

Thirty minutes from now.

Is that agreed? Agreed.

Sitting suspended at 8.05 p.m. and resumed at 8.35 p.m.