I welcome the Minister of State at the Department of Finance, Deputy Martin Cullen, and his officials to the meeting. We will consider the Bill until 5 p.m. and if we have not concluded by then a further meeting will be arranged.
State Authorities (Public Private Partnership Arrangements) Bill, 2001: Committee Stage.
Acting Chairman
The proposed legislation has a pivotal role to play in the development of the PPP process. The main purpose of this Bill is to safeguard against issues that arose in other jurisdictions in the PPP process concerning certainty, or the vires of public authorities to engage in public private partnerships. It is widely recognised in all countries where PPPs are in use as a public procurement option that the issue of legal capacity or vires of public authorities to enter into PPPs is seen as being crucial to their overall success. International experience has shown that investors in PPP projects require a high degree of legal certainty regarding the vires of public sector contracting authorities. The importance of the legal capacity of public sector bodies to enter PPP type arrangements has already been highlighted in a number of high profile legal actions outside this State. Such actions have not served to enhance the reputation of PPP as a method of public procurement and it is not a situation the Government wishes to see developing in this State.
It is with this in mind that the Minister for Finance published the draft legislation now being discussed. The Bill provides certainty as to the powers of State authorities to enter into PPPs and gives local authorities the power to enter into joint ventures. The Government has moved quickly from the publication of the Bill to bring these legislative proposals before the Oireachtas, such is the importance of providing legal certainty in this area.
Since publication of this Bill in July, the Department has received submissions and representations on the text of the Bill from a range of interests. These include Members of these Houses, public representatives in general, the social partners involved in the PPP process - IBEC, the CIF and ICTU - legal firms, financial institutions and members of the public. All submissions received were carefully considered and, in some cases, officials from my Department had follow-up discussions with the relevant individuals and organisations. I thank all those concerned for the many useful and constructive suggestions received.
As we work through the proposed Government amendments to the Bill, it will be noted that significant changes are recommended to certain sections. Many of these incorporate the points raised. It has not been possible to accede to all submissions received and on a number of issues, notably those concerning human resources affecting public sector employees, landlord and tenant issues, compulsory purchase of lands and user charges in NRA projects, there are no proposals to amend the Bill. This does not indicate a lack of commitment on the part of the Government to dealing with these issues. On the contrary, we will seek to deal with them in the most appropriate way.
We should be clear that this Bill is for a defined and restricted purpose. I have concerns about the use of PPPs in certain areas. There are important issues in relation to the contractual obligations of the various parties, the rights of workers and the use of user charges in certain projects. All these issues arise in the context of PPPs but while we should touch on those this morning, we should be aware that the purpose of the Bill is quite narrow and well defined. There are concerns the trade union movement will raise that are not part of this Bill and I will mention those.
SECTION 1.
Acting Chairman
Amendment No. 2 is consequential on amendment No. 1 and they may be taken together by agreement.
I move amendment No. 1:
In page 3, subsection (1), between lines 25 and 26, to insert the following:
" 'direct agreement' has the meaning given to it by section 3(1)(c);”.
These are technical amendments which propose to re-order the definitions of functions and direct agreement to maintain the alphabetical order of the section.
Amendment agreed to.
I move amendment No. 2:
In page 3, subsection (1) , to delete line 30.
Amendment agreed to.
Acting Chairman
Amendment No. 33 is consequential on amendment No. 3 and they will be taken together.
I move amendment No. 3:
In page 3, subsection (1), between lines 30 and 31, to insert the following:
" 'local authority' means a county council, city council or town council for the purposes of the Local Government Act 2001;".
This is a technical amendment to update the definition contained in the current text to ensure it is fully consistent with the new terminology for local authorities following the coming into force of the Local Government Act, 2001. The amendment also provides for ease of reference for moving the definition of local authority from its current location in section 4(4), page 5, lines 40 to 43.
The amendment is correct. Should we include regional authorities as defined local government bodies for the purposes of the Act? I am unsure if regional authorities are dealt with in the most recent local government Act but it would be reasonable to give regional authorities the same powers as we give to other local authorities.
I want to be consistent. Regional authorities are not dealt with in the other Act.
Does it follow that regional authorities do not have the powers conferred on local authorities in this Bill?
Yes.
So they have no powers to enter into PPPs.
They are not defined in this Bill.
There may be circumstances where it would be appropriate that they should be. If the regional authority covering the Dublin area wanted to enter into an arrangement for public transport purposes with a private body, that would be the most appropriate body to do so rather than four or five local authorities coming together.
Regional authorities are assuming more and more responsibility. Often PPP projects will span local authority areas. Hence, the regional authority might be involved so it is worth consideration.
Does the Minister envisage that local authorities might enter PPP arrangements in the future? Can he give examples of where local authorities might be able to fit into PPP arrangements?
That has already happened. For instance, the water and waste management systems are an obvious area for local authorities. As the PPP process develops local authorities will see more opportunities but it would be a matter for themselves. I have given a legal basis for them to do so. It is important that there is no uncertainty with regard to their ability to enter into PPP projects and the Bill achieves that.
I do not disagree with the Deputy's first point. In my experience there is always a lead local authority on these projects. Notwithstanding what the Deputies have said, what they propose would necessitate very substantial changes in the local authority structure. I am involved in a major flooding scheme in the River Tolka involving three major local authorities. While my office is working with the three local authorities the whole project is moved through one authority so there is a lead authority which involves the others in the process. There may be a better way of doing this through regional authorities. I am not sure members of local authorities would be happy with legislation which removed or duplicated the powers of individual local authorities and replaced them within a regional authority structure because that would transfer authority and certainty from local authorities to a different body. The development of regional authorities gives rise to that sort of question but for the moment I am dealing with the matter in a specific way and I give the experience of the Office of Public Works as an example.
I accept the Minister of State's point but the proposals regarding waste management were brought forward on a regional basis. When a number of local authorities make up a region some local authorities might adopt the programme and others might not and the programme could fall for that reason. I accept that the Minister can subsequently intervene and override local authorities. Would it not be preferable to have a regional forum which could take decisions for the region? A reference to such a forum in this legislation could have a beneficial effect on PPPs in progressing desirable projects.
I do not disagree with the Deputies. Having served on a local and regional authority I can see the possibilities of managing matters regionally. However, the genesis of projects is local authorities taking initiatives within a region. The legal authority to do this is vested under local government legislation in the local authorities. However, the Deputies are raising a question which may become an issue in the future.
Because Deputies McGrath and McDowell have raised the issue of regional authorities, and if it does not pose a problem, it may be possible without prejudicing any position to include a reference to regional authorities in this Bill and see what happens in the future. I will examine the possibility of doing that. The current practice is that local authorities initiate and manage programmes. I am not aware of a demand from local authorities to allow regional authorities subsume some of their powers.
I accept the Minister of State's point that we cannot use this Bill to re-jig local government and that is not what I am attempting to do. Is it possible to provide an enabling power which would not necessarily confer the power? If so, we should go that route.
I will look at that aspect for Report Stage.
Amendment agreed to.
Section 1, as amended, agreed to.
Section 2 agreed to.
SECTION 3.
Acting Chairman
Amendments Nos. 4 and 20 are related and may be discussed together. Is that agreed? Agreed.
I move amendment No. 4:
In page 4, subsection (1), line 16, after "may" to insert ", either itself or in conjunction with any other person (including another State authority)".
This amendment is for the purpose of clarification and to cater for the possibility of a State authority joining with others, including other State authorities, in a consortium to effect the public partner element in a public private partnership arrangement. This is probably exactly what the Deputies have been talking about but I am doing it in this way. That is the purpose of the amendment.
Amendment agreed to.
I move amendment No. 5:
In page 4, subsection (1)(a), lines 19 and 20, to delete “discharge of specified functions of the State authority” and substitute “performance of functions of the State authority specified in the arrangement”.
This is a technical amendment, the purpose of which is to clarify that the functions referred to are those specified in the particular public private partnership arrangement, as distinct from any other functions of the State authority that may be specified elsewhere.
Amendment agreed to.
I move amendment No. 6:
In page 4, subsection (1)(a)(iv), line 32, to delete “relating to an asset”.
This amendment, in the name of myself and Deputy McDowell, proposes to delete the four words "relating to an asset". Public private partnership arrangements could be entered into in order to provide services only. For example, the national car testing body provides a service. Similar services could be provided under a PPP arrangement. Deleting these four words would allow contracts to be entered into for the provision of such services not actually related to an asset. It is my understanding that the NCT body did not provide assets. In most cases assets such as buildings were leased although the body was contracted to provide a service. The amendment could open areas for future PPPs.
The presence of a physical asset is not necessary for the provision of a service. A PPP could equally relate to the provision of a service in the absence of a physical asset. The traditional format has been that a building or some physical asset is managed but it is not difficult to imagine circumstances where a service would exist separate from a physical asset. I do not think there will be many such services but the amendment allows for the broadening of the definition.
This is an interesting issue. I have given careful consideration to the arguments made and I recognise the concerns of the Deputies. However, I am satisfied that these amendments cannot be accepted. The effect of the changes proposed would be to involve PPPs in the provision of a wider range of services than currently envisaged. This would run contrary to the thrust of this section which provides that PPP arrangements concern assets and/or services relating to assets. Schools may be taken as an example. The PPP arrangement would be to provide the school building and services relating to the building, such as maintenance and caretaking. The PPP would not involve services unrelated to the school building asset, such as the care of students, teaching and curriculum development which would be completely and utterly outside what we would intend. I assume this is not the intention of the Deputies but it would be the effect of their amendment. Widening the definition of services to be provided under a PPP in the manner proposed would create future difficulties for stakeholders. Accordingly, I have to oppose the amendment.
The example given by Deputies McGrath and McDowell is not excluded by the legislation. However, a broadening of the definition would take us into new territory, an example of which I have given. That would be unsatisfactory for a number of reasons. I thought long and hard about this, but could not find a way of going beyond what we had without seriously undermining what was already in place, for example, in teaching.
I accept that the Minister of State has fears about the expansion of the definition and the consequences it may have, but any PPP agreement must meet the requirements of the Government, the Minister concerned and his or her Department. In the example the Minister of State gave of building a school and providing services no one would imagine that it would include providing teachers also. Is the Minister of State saying that the Bill will provide an opportunity for services not specifically tied to assets, as in the case of the NTC?
I am puzzled by what the Minister of State says. The power of the Government is defined in the contract as it only enters into the PPPs that it wants to and the provision of the service or management of the asset would be provided for in the contract. There would be no question of contractors assuming powers not defined in the agreement or intended by Government which means that there is no risk. This has implications for the bigger issue of whether we need to confirm the vires of Government to enter into an agreement for the provision of a service.
I am seeking specific legal advice on the matter as I do not wish to mislead the committee. The Attorney General's advice - the NCT was among the matters considered - is that the definition of "asset" would cover a PPP in that area.
I do not understand the definition. It is stated that it includes an already existing asset or an asset to be provided under public-private partnership arrangements.
The point is that it is does not go beyond that.
Therefore, it does not define "asset."
It leaves it wide enough. I want to be careful about the other side of the equation, the intent of what the Deputies ask. If it is services only, there is no suggestion, as the Deputies must realise, of the legislation opening the door to a wider range of service provision not related to it or PPPs at all. Once it is in place, people may challenge the right to examine the curriculum and other services, but "asset" is defined widely to cover——
It is not defined.
That is the reason I am making this point to the Deputy——
I will not push it, but it is unnecessary to have an enabling Bill to allow the Government to contract out a service.
I will not press the amendment on the understanding that the Minister of State will examine the matter before Report Stage.
I did not promise that about the amendment, but will seek legal certainty in relation to it, although I am happy with what I have been told. I want to ensure we can do as much as possible with PPPs and do not want to include any restrictions in the Bill, which is the reason the definition of "assets" is so wide.
Amendment, by leave, withdrawn.
I move amendment No. 7:
In page 4, subsection (1)(a)(iv), line 33, after “years” to insert “and the provision of finance, if required, for such services”.
The purpose of this amendment is to provide certainty that, where a State authority undertakes to provide services relating to an asset, it also makes financial provision, where necessary, for the project. This makes common sense.
Amendment agreed to.
Acting Chairman
As amendments Nos. 8 and 17 are consequential, they may be discussed together.
I move amendment No. 8:
In page 4, subsection (1)(b), line 34, before “arrange” to insert “subject to subsection (4),”.
This is a technical amendment noting the provisions of a later proposed amendment to insert a new subsection (4). It is proposed on the basis of legal advice and aims to offer the Minister for Finance the same degree of control over Exchequer funds used to finance PPP projects as over analogous payments, in other words, the borrowings of State agencies to fund infrastructural projects undertaken by traditional procurement methods.
I am satisfied, under further legal advice, that the streams of payments likely to arise within PPP arrangements do not constitute borrowing. However, the liability created is analogous in its effect and the Department of Finance has a consequent obligation to exercise appropriate control in respect of the effects of such streams of payments. It follows that the Minister for Finance should be able to exercise control over the aggregate liability accruing in the case of PPP arrangements. Paragraph 5 clarifies that the existing statutory functions of the State authorities are not affected.
I do not understand this. Is the Minister of State saying that the Minister for Finance can dictate in a given year that a certain amount can be set aside for all PPP arrangements or only for roads, wastewater and so forth, and that a certain aggregate value cannot be exceeded, irrespective of any contractual arrangements otherwise?
It would happen before they enter contractual arrangements. I understand the amendment to mean that it is important that the Minister for Finance of the day is aware of the aggregate liability. While every project will be judged on its merits, there must be some control over total expenditure. There could be substantial borrowing for some projects with the liability being on the State. The Minister for Finance, therefore, wants to ensure the aggregate liability is not excessive. This section gives the Minister that role. It is a belt and braces measure.
I still do not understand it. The amendment specifically states that the Minister may at any time prior to entry into the PPP arrangement, which must mean a specific PPP arrangement, give directions to an appropriate Minister. If we take the example of Luas and the Department of Public Enterprise, are we saying that before the Department, or a local authority involved, enters into a PPP arrangement with a private sector provider the Minister for Finance could direct the Minister for Public Enterprise "in relation to the aggregate value of Exchequer moneys committed to such arrangements?" If so, what does that mean?
It means debt management. If we take Luas as an example, there are substantial contractual elements and cash flows involved. The Minister for Finance wants to know what they are to ensure the Exchequer has the capacity to meet the requirements, in other words, that a Minister does not enter into arrangements for which there is no Exchequer funding available.
What does this give him power to do?
It gives the Minister for Finance overall responsibility. The Minister for Finance has responsibility in any case, but does not want any Minister, without reference to the Department of Finance, entering into arrangements involving major Exchequer cash flows without that being planned. That is simply debt management and is a sensible approach. When these projects take off, the annual commitment should be known in advance. As many of them are big infrastructure projects, there will be substantial cash flows over four to six years or longer. The volume of these flows will be clear from the beginning so the Minister will take that into account in terms of finance planning and debt management. He will know what funds the Exchequer has to meet and ensure that the money is there to do so.
Does that mean that, after the bid and tendering processes are completed and before the final sign-off on documentation, the Minister for Finance can effectively come in and say, "No, you cannot do this as you have exceeded a specified aggregate amount"? Is that what is being said?
No.
My understanding of this is exactly as Deputy McDowell said. There was experience of this recently. In the case that already happened, the Department of Education and Science was in intense negotiations over a long period with providers in a PPP to provide five schools. When the negotiations were nearing completion and were at the point of agreement with the Department of Education and Science and the providers, the Department of Finance raised its head and got involved. It would not allow it go through unless it was involved. The result was that the project was delayed by up to six months because the Department of Finance had to go back and renegotiate many of the terms that had been agreed. Is that the right way to do business or is there a better way?
Perhaps the Department of Finance should be involved with the sponsoring Department at the initial stages so that it would not have to wield the stick in the final stages. A PPP is planned for the Kilcock to Kinnegad motorway where tenders have to be in on 18 February. Four companies are interested in tendering and there is enormous expenditure involved in putting together each bid. If the Minister for Finance steps in and says, "No, we are not going ahead with that as we do not have the money to do it", could the Department of the Environment and Local Government be sued by the various companies because they have been led up the garden path and incurred huge expenditure? Will that money be recoupable? Would it not be better to have the Department of Finance involved at each stage so that negotiations would not be prolonged and cut off just prior to the signing stage?
Perhaps what I said was misleading. The Department of Finance is involved at key stages throughout. At the end, it withdraws from the process and the line Department goes ahead. We have started the PPP process on a pilot project basis so there are commitments and it is well known what will happen with them. There is no uncertainty on that and we are rolling out the process, but, because this is a new approach, it is a learning curve for all of us. The projects already identified in specific areas have been identified as pilot projects. We want to ensure that they will be successful and we will expand the range substantially. I am sure some Ministers will have ideas that will fit well into the PPP process. We do not want it expanding to a point where the level of exposure would be out of kilter and PPPs, in terms of what is involved in them and the exposure of the State, would be too great and we find that perhaps they should have been done by a different method. We are rolling it out on a careful pilot project basis and it will involve the Department of Finance through the early stages. The Department involved will go ahead after a certain point.
The Deputy made a point in regard to a private sector company having tremendous exposure in the early stages of bidding for PPPs. There is a lot of money involved and those companies do not want to be involved in something uncertain. Uncertainty is not the intention of the Exchequer either.
Does this additional amendment effectively give a last minute veto to the Department? Is that what it is intended to do?
It is certainly not intended to give a last minute veto. It recognises that the Department of Finance has responsibility. Nobody would deny that.
Will the Minister address the specific case in relation to the education projects, if he is familiar with it, or perhaps he like to come back to us on it? My understanding is that the Department of Finance came in at the last minute, reopened the negotiations and delayed the project quite substantially. We can all see the difficulties and the knock-on effects of such an experience. There must be a better way of doing business. The right way is not to bring someone to the point of having a drink of water and then take it away. Was the Department of Finance not sufficiently involved, if that is what happened? How can we get over that and ensure it does not happen again?
I do not want to spend the committee's time dealing with a specific project. Regarding what the Deputy said, it is not the case that the whole process was renegotiated. There were points in the construction of the model that needed to be clarified and there were issues that all sides agreed were less than perfect. In the clarification process, it improved substantially. The process is new from the private sector point of view and that of the State. It is a learning process but it would be ludicrous to allow ourselves to embark on major PPP proposals and then to have the Exchequer say that it would not support them.
The Department of Finance is issuing guidelines in the area and they are important for everybody. The Department will be involved at key stages of agreement with the line Department and the project. The purpose of the amendment is that funds will be allocated within a margin or range. If at the start of the project it is clear that a certain amount of money is involved in the process, it cannot suddenly change to a different amount. This amendment is to try to avoid something going wrong at the end of the process.
This is a curious provision and I do not understand where it is coming from. It reads like something that somebody in the public expenditure division of the Department of Finance decided was necessary as a way of putting down a marker to warn Departments that they should not lose the run of themselves. We all know they have that power so why they feel it is necessary to give specific legislative power to the Minister to do that in such an ill-defined way is beyond me.
It is a prudent provision in this legislation. We have done the same in other legislation. As the Bill deals with the legal basis for the public private partnership process, it was felt——
The danger is that it flags to private sector companies which look to get involved in joint ventures that there is another process. It reminds them not to forget that the Department of Finance may eventually decide it does not have the money for the project. Is that what it does?
No, that would not be the correct interpretation. The interpretation is certainly not suggesting that - if it was it would be unworkable.
It allows the Department to say at some point to the Minister for the Environment and Local Government to be aware that he has only a limited budget for PPPs for roads so that anybody entering negotiations with the Department or with local authorities in relation to roads knows there is the eventual possibility the Department of Finance in its annual Estimates will decide the money is not available.
It is giving certainty. The Deputy has picked on the Department of the Environment and Local Government, which has a huge involvement in PPPs and a huge infrastructural roads project. There is already quite a number of substantial projects which have been identified as PPP projects and moneys are being allocated. There will clearly be more in the future but there is not necessarily the capacity for a myriad of projects to happen at the same time. This legislation gives certainty to the private sector that moneys will be provided and will ensure everybody will know the finances available for a PPP. It sets out what the State will deliver to the private sector. That comes at the start of the process. We do not want to embark upon 15 major PPP projects costing many billions of euros to be followed suddenly by an additional 15 projects before the initial projects have begun.
I accept that there is a problem. At the moment various local authorities and the Department of the Environment and Local Government are at various stages of negotiation on the procurement process for virtually all the motorway projects. Is the Minister of State saying that if the Department decided, for example, the Waterford road was less important than some others, it could pull the plug on the project, notwithstanding negotiations that might have already begun?
These projects have already been clearly identified and negotiations are already well under way. I want to be very clear on this. These projects are already in the market place. They have been already identified by the Government, are stated PPP pilot schemes and are to be delivered. The State and the Exchequer are committed to providing them.
What does "until entry into the PPP arrangement" mean in that case? Does that mean when the final contract is signed or does it mean what the Minister of State has just described, namely, when the process is initiated as it has been with the Waterford motorway?
When the process is initiated. In other words, the State cannot take the private sector off on a wild goose chase. No Minister could go off on a wild goose chase on his or her own and start negotiations and where no provision had been suggested bring commitments from the private sector on board. It gives certainty to the private sector: it knows that when a process is started on a PPP project, the Exchequer funding will be in place. That happens at the beginning of the process.
Is the Minister of State saying that if the State agrees to put out some particular project to the PPP tendering process that the State at that stage is giving a commitment that funding within certain parameters is available for the project?
That is absolutely correct.
As Deputy McDowell asked, "the point" is not at the point of signing the contract but rather at the point of initiation of the tendering process.
Perhaps where we have gone astray in the discussion is in talking about the detail, in a narrow sense, of projects, even though that is very important. The Department and the Minister want to bear the aggregate exposure overall but they must be aware of what the overall long-term commitments will be as a result of what is already in place. Before taking on new projects they must be secure that the exposure faced by the Exchequer is bearable.
The first sub-clause of the amendment says: "at any time until entry into the PPP arrangement". It is project-specific. The second paragraph talks about aggregates. That is where a certain confusion arises. If I was the Minister of State I would not be as clear as Deputy Cullen in relation to where the process starts. The State's obligation cannot really be construed as starting until such time as there is a signing off on something. The Minister of State is getting into difficult territory if he accepts an obligation from the moment negotiations are initiated.
I say it specifically because I am speaking as a Minister of State and equally as a politician. It would be ludicrous for the State or any Department to embark on major projects and enter negotiations with private sector venture capitalists and then at the end of this lengthy process to change its mind. That would completely undermine the entire PPP process. It would make it impossible for the private sector to have confidence in the State's commitment to any project if that was the case. That is why I am being so definitive. This amendment does not necessarily arise from the Department of Finance's point of view; it arises from the private sector's point of view. The private sector wants certainty at the start of the process.
We have had an interesting discussion. There is a lengthy procurement process for PPP which starts with identification of a project and the cost benefit analysis and value for money assessment before a tender is even sought. All of those factors are present at the beginning of the process and one is well aware of what will happen. This is not the only procurement process and not everything will be by PPP. I am being very specific and perhaps Deputy McDowell is correct when he warns me of being in dangerous territory. I am being specific because the other way does not work. This amendment is as much driven by the private sector as the Department of Finance.
I agree with what the Minister of State says but I cannot relate it to the words in front of us.
I will look at the wording.
The Department of Finance must have a say or a veto in the context of the fiscal position at any given time. Ideally, that veto should not be used and the process should be completed once begun. Inevitably if the money is not there a few years down the road then the Department of Finance must have a veto. We may have to look at some method whereby the Department would cover the bid cost beyond a certain point.
I will look at the wording. If there is a question mark about the wording and if it needs more clarity I will quite happily agree to that. I have no difficulty in improving legislation.
Amendment agreed to.
Acting Chairman
Amendments Nos. 9, 10, 11 and 12 are related and may be taken together by agreement.
I move amendment No. 9:
In page 4, subsection (1), lines 40 to 42, to delete paragraph (d) and substitute the following:
"(d) transfer an interest, or part of an interest, of the State authority in an asset or part of an asset, to the partner, or, subject to the prior consent of the appropriate Minister or, if the State authority is a Minister of the Government, subject to the consent of the Minister for Finance, to a nominee of the partner by transfer, assignment, conveyance, grant of lease or licence or otherwise,
(e) take a transfer of an interest of the partner or a nominee of the partner, in an asset or part of an asset, by transfer, assignment, conveyance, grant or surrender of lease or licence or otherwise.”.
The purpose of this amendment is to clarify and broaden the provision in the current text. It has been drafted following consideration of representations received from a number of interests including the Minister for the Environment and Local Government, IBEC and ICTU. The proposed new text allows a State authority to transfer its interest in an asset or part of an asset to a partner. Subsection (c) follows (d) in allowing a State authority to also receive a transfer of an interest in an asset from PPP partner, for example, following the end of a concession arrangement so that it can revert to the State. An asset in this context includes land. The Department of the Environment and Local Government, IBEC and ICTU wanted this certainty and that is why we drafted the amendment. It makes it clear that the asset can be transferred either back to the private sector or to the State authority.
Amendment agreed to.
Amendments Nos. 10 to 12, inclusive, not moved.
Acting Chairman
Amendment No. 13 is out of order as it involves a potential charge in the Revenue and cannot be moved.
I beg your indulgence, Chairman. I would like to say a few words about the amendment. This involves the so-called hedging arrangement and would protect the Department of Finance in the case of an agreement being terminated. If a party enters into a PPP arrangement and is raising significant money, it enters an agreement on interest charges, etc, with various banks. The hedging arrangement covers its liabilities where there might be changes in interest rates during a long-term agreement. If the Minister for Finance wants to buy out the partnership and take it back into State control, it will be very expensive for him to buy out this hedging arrangement which he will also have to take on. If he could take on that liability rather than necessarily buying it out, it might cost the Exchequer less. That is my understanding of this amendment and I ask the Minister to consider it. Having heard what I said, it may not make complete sense and he may want to go away and think about it. However, it should give protection to the Department in the longer term and should save the taxpayer in the event of the Government buying out the arrangement.
Although I knew the amendment would be ruled out of order, I have some notes on it and, as they are not too long, I will respond to Deputy McGrath on the issue for the benefit of the committee.
Acting Chairman
I will allow the discussion.
My concerns include the fact that if such a provision had to be made, it would be more appropriate that the assignment of interest rate or other hedging arrangements by a State authority should be a matter for the National Treasury Management Agency. The consequences of such an arrangement would have to be worked out in detail before making legal provision. This Bill is an enabling measure and it is not appropriate to make such provision for proposals involving assignments of liabilities in this legislation. It may be possible to address the Deputy's concerns under existing arrangements and to resolve any issues arising administratively. If it is necessary to make such provision, it can be done in the context of the Finance Bill.
In recent years, where money was available, the Office of Public Works bought out many design built finance projects, including some recently. The National Treasury Management Agency took a detailed look at the contracts involved and advised us on whether it was in the best interest of the State to buy out the contract, as opposed to leaving it run, and, if so, what the price should be. Our concern was to protect the State and the taxpayer. We have been able to do that under existing legislation and what is proposed in this amendment is not disallowed because it is a PPP arrangement. The same provisions prevail. We have very successfully done much of this in recent years using the NTMA and others to advise us on where the best interest of the State lay vis-à-vis the costs of buying out contracts as opposed to letting them continue.
Were hedging arrangements involved and did the Department buy them out?
I cannot say with certainty what were the technical arrangements. I can only give the broad definition as I understand it. It was very successful for the State and there was no impediment to us doing it. There should be no impediment in these cases.
As a general comment, this section looks to confer certain powers and vires on the State, most of which it probably has. If it is done in that belt and braces way, there is always a danger that by omitting anything specifically it might suggest in some way that the State does not have that power. In an earlier amendment the Minister specifically added in the provision of finance as an explicit power of the State. I assumed the State had that power anyway. In the context of the amendment tabled by Deputy McGrath, I would have expected the State to have the power to take on a hedging arrangement if it wanted to and we did not need to specifically provide for that power in the Bill. Perhaps the Minister might make some inquiries on that issue.
I agree with Deputy McDowell and that has been my experience as a Minister in the Department that buys and sells the majority of property on behalf of the State.
Why then was finance provision explicitly added?
It was in legislation, but it was a very broad definition. In case anybody had any doubt about it, it was felt that this would give certainty.
That is the problem. Trying to address doubt can create doubt.
I accept the point. We come across this on many occasions.
Amendment 13 not moved.
Acting Chairman
Amendments Nos. 14 and 15 form a composite proposal while amendmentNo. 16 is related and they may be discussed together.
I move amendment No. 14:
In page 5, subsection (3), line 7, to delete "such".
Having examined amendment No. 16, proposed by Deputies Mitchell, McGrath and McDowell, I agree with their arguments and I will accept their amendment. Amendment No. 15, therefore, will not be moved. The revised text resulting from amendment No. 16 is in line with legal advice on the wording of the text. The revised text reflects and underscores the reality that the terms and conditions of a PPP arrangement are negotiated by the PPP partners and it is during the negotiation of the contract that a State authority should stipulate the terms and conditions relevant to the private sector partner's performance and obligations.
Amendment agreed to.
Amendment No. 15 not moved.
I move amendment No. 16:
In page 5, subsection (3), lines 9 and 10, to delete "as may be specified by the State authority concerned" and substitute "as agreed by the State authority".
Amendment agreed to.
I move amendment No. 17:
In page 5, between lines 10 and 11, to insert the following subsections:
"(4) (a) Where a payment is arranged or provided for pursuant to section 3(1)(b) the Minister for Finance may, at any time until entry into the public private partnership arrangement by the State authority, give directions to the appropriate Minister in relation to the aggregate value of exchequer moneys committed to such arrangements, as he or she considers necessary.
(b) The appropriate Minister shall, in performing his or her functions, have regard to any directions given by the Minister for Finance under this section.
(5) Functions conferred on a State authority by this section are in addition to and not in substitution for any other functions of the authority.".
Amendment agreed to.
I move amendment No. 18:
In page 5, between lines 10 and 11, to insert the following subsection:
"(4) The terms and conditions of each public private partnership arrangement must comply with the following general principles:
(a) risks should be clearly identified and distributed appropriately between the parties to the contract;
(b) innovation by the private sector in providing infrastructure and public services should be encouraged, to realise value for money over the lifetime of the project;
(c) the provisions governing the transfer of public capital infrastructure from a public authority to a private sector consortium (i.e. by means of lease or licence) and its reversion at expiry of the concession period should be clear and transparent at the outset and over the lifetime of the public private partnership project;
(d) the payment mechanism should provide a clear procedure for establishing the charge on public expenditure over time;
(e) reduction in costs over the life span of the contract should be incentivised in order to bolster price-competitive quality public service provision;
(f) adequate flexibility, where feasible, to encompass, with the agreement of the contract parties, new and innovative ways of upgrading the quality of services (in response to advances in technology and innovations in potential delivery mechanisms);
(g) full disclosure of all relevant information relating to the conduct of the public private partnership over time should be encouraged in order to minimise the scope for costly information gaps arising between the public and private sector partners;
(h) regard for prevailing national and/or industry wide agreements on pay and conditions including health and safety regulations; and
(i) the output specification should take account of the following general principles:
(i) the level of service quality and design should be related to the objective for the service and user requirements;
(ii) social and environmental sustainability and gender equality/disability considerations;
(iii) any need for improvements in service standards over the lifetime of the contract required to comply with regulatory obligations, for example, relating to environmental and public health standards.".
These terms should be included in the Bill. I confess they are stolen entirely from the document by the Public Private Advisory Group on PPPs, titled Framework for Public Private Partnership - Working Together for Quality Public Services. These terms should apply to good PPPs. They are worthwhile and give protection to workers. They should be incorporated into a Bill like this to ensure that standards are maintained and that everybody is protected, particularly the workers who may be involved. Accordingly, I put forward this amendment to the Bill.
I accept that the PPP context should be informed by fundamental principles such as those relating to best practice, innovation, risk transfer, sustainability and equality. I am happy that the Deputy has taken up the Framework Document. I have listened carefully to the arguments made and I share the Deputy's concerns in relation to ensuring that best practice prevails in the development of public private partnerships. However, I cannot accept the amendment. In my view, it is not appropriate to enshrine these principles in the enabling legislation. Many of the principles contained in the suggested amendment are already espoused in the framework agreed for PPPs, as agreed with the social partners and launched by the Minister for Finance. Furthermore, under existing legislative arrangements, regulatory obligations such as those relating to environmental health and equality provisions, of their nature have to be taken into account in public private partnership arrangements. Issues such as output specification, disclosure and flexibility have been dealt with in the framework and are matters for the PPP contract itself. Guidance on such matters will be prepared by the central PPP policy unit for circulation to all State authorities in the near future. I must therefore oppose the amendment. The matters raised by the Deputy are already in the Framework Document and it is not appropriate to include them in the legislation.
I agree with the Minister of State. We could not have judges deciding, for example, whether the risks were being clearly identified and distributed appropriately between the parties. Those are matters for each individual contract and should not be left open to judicial review.
That is the legal advice which we have received.
I am happy to withdraw the amendment on the basis of the Minister of State's assurance that the requirements will be dealt with in the various agreements.
Amendment, by leave, withdrawn.
I move amendment No. 19:
In page 5, between lines 10 and 11, to insert the following subsection:
"(4) The Landlord and Tenant (Amendment) Act 1980 does not apply to leases entered into under section 3(1)(d).”.
Under landlord and tenant agreements, if somebody is in possession of a property for a period of time, they retain possession. My intention is to ensure that under any such agreement a private body in possession or quasi possession of what is in effect a public amenity will not acquire rights under the Landlord and Tenant Act. I would like to hear the Minister of State’s comments.
I recognise the nature of the issue and its potential implications for PPPs. However, I cannot accept the amendment. The issue is primarily a matter for my colleague, the Minister for Justice, Equality and Law Reform, who is currently in the process of reviewing elements of the landlord and tenant legislation. Accordingly, it would be premature as well as inappropriate to try to deal with this issue in this Bill, the primary objective of which is to establish the vires of State authorities in relation to PPPs. I am advised that it would be inappropriate to deal with the issue in the context of this Bill because amendment of the relevant landlord and tenant legislation is required. Moreover, I am advised that careful drafting of the contracts in relation to relevant PPPs should obviate the risk of difficulties arising in respect of landlord and tenant provisions. Guidance is being prepared by the PPP unit in my Department on this matter and will issue to all State authorities in the near future. This is a highly complex and technical area which goes further than PPPs and warrants expert evaluation and consideration by the Minister concerned.
It is an important issue. For example, if a school premises was leased under a PPP arrangement, with a leasehold interest being created, there is a serious question as to whether the lessee, or concessionary, has a legal right to renew the lease and whether the State's interest was being disposed of in perpetuity, rather than just for the concession period. There is a need for some certainty in that regard. If a concession is for a period of 30 years, it should be effective for that period only, subject to whatever rights of renewal are provided for in the contract. If landlord and tenant law intervenes to supersede that, there is a problem. Can the Minister of State say if it is possible to exclude the provisions of existing landlord and tenant legislation by way of specific contract?
Yes, that is possible.
If it will require separate legislation to protect the State in this regard, would it not be simpler to put in an amendment along the lines which I have suggested in this Bill?
Sorry, I was unduly definitive in my previous comment. Obviously, one cannot ignore existing legislation. The matter is being examined currently. The guidelines recognise the position under existing landlord and tenant legislation in terms of drafting contracts and making specific arrangements. Further to that, it is important to ensure that the kind of situation to which Deputy McDowell has referred does not occur. I fully share his concern in that regard.
What legal advice has the Minister of State had on the matter? I suggest we go into private session to get that advice directly.
Acting Chairman
Is that agreed? Agreed.
The Select Committee went into private session at 12.46 p.m. and resumed in public session at 12.48 p.m.
The Minister of State has recognised that there is a possible difficulty in relation to this matter and that a valid point has been raised. It is quite a complex legal question. I am prepared to withdraw the amendment on the basis that, at Report Stage, the Minister of State will come back with a more definitive statement on how he proposes to deal with that difficulty in relation to PPPs.
Amendment, by leave, withdrawn.
Question proposed: "That section 3, as amended, stand part of the Bill."
I assume that the first sentence in the section, "Without prejudice to the functions of a State authority . . . ", is meant to reinforce the fact that this is a belt and braces provision, as opposed to being absolutely necessary, and is in addition to the functions the State already has, either explicitly or implicitly under legislation.
Yes.
Question put and agreed to.
SECTION 4.
I move amendment No. 20:
In page 5, lines 28 to 43, to delete subsection (4) and substitute the following:
"(4) In this section 'functions', in relation to a State authority, includes functions of any other State authority to be performed by it pursuant to an agreement or arrangement duly made by it with that other authority.".
Amendment agreed to.
Section 4, as amended, agreed to.
NEW SECTION.
Amendments Nos. 21, 22 and 23 are related and may be discussed together, by agreement.
I move amendment No. 21:
In page 6, before section 5, to insert the following new section:
"5.-Where an agreement or arrangement was entered into on a date before the commencement of this Act, and that agreement or arrangement would have been a public private partnership arrangement or direct agreement if this Act had been in operation on such date, then the agreement or arrangement, as the case may be, shall have effect and be taken always to have had effect as if this Act was in operation when the arrangement or agreement was entered into.".
This amendment was drafted following representations received from Members of the Houses and the Irish Business and Employers Confederation in relation to the phrase "good faith" in the existing text. Legal advice confirmed that the phrase was ambiguous and could lead to legal difficulties. The revised text simply offers improved wording to include existing PPP-type arrangements already entered into by the State authorities listed in the Schedule within the scope of the Act.
This proposal also addresses the amendment to the original text proposed by Deputy Jim Mitchell and Deputy McGrath. The amendment acts on legal advice that the phrase "good faith" was not certain enough. We have tried to come at it in a different way by using a different formulation of words that met the same requirement as good faith is a subjective concept.
I am glad that the Minister is bringing forward an amendment. However, I understand the new amendment might not cover the concerns expressed. In conjunction with the new amendment, the Minister might consider slight amendments to that amendment to specifically refer back to section 3(1) of the Bill. The word "power" contained in that amendment has been dropped. It is not in the new amendment. The phrases "power to enter into it" and "duly exercise that power" are gone. However, the amendment needs to be tied to section 3(1).
Obviously, I would not have put it in if I did not have legal advice that it had the same effect. If I need to do something on Report Stage, based on what the Deputy says, I will do it. However, the legal advice I have is that it will have the same effect. It is simply better wording. It says at the start, "Where an agreement or arrangement was entered into".
My understanding is that section 3 prospectively gives certain powers to the State authorities. My understanding was that section 5 was intended to retrospectively apply the same powers. Perhaps, we could clarify that by cross-referencing the two sections.
Amendment agreed to.
Amendments Nos. 22 and 23 not moved.
Section 5 deleted.
SECTION 6.
Amendments Nos. 25 and 26 are consequential on amendment No. 24 while amendments Nos. 27 and 28 are related. Amendments Nos. 24 to 28, inclusive, may be discussed together by agreement.
I move amendment No. 24:
In page 6, subsection (1), line 10, after "may," to insert "either before, or at the time of entering into a public private partnership arrangement and,".
The purpose of these amendments is to clarify the operation of PPP arrangements after the signing of contracts. Representations were received from a variety of sources, including the Minister for the Environment and Local Government, the Minister for Public Enterprise, IBEC, the CIF and from a number of private individuals. Concerns were based on a perception that the original text could allow for intervention in PPP arrangements and that this would serve as a disincentive to private sector involvement in PPPs in Ireland.
The original text was intended to meet certain concerns about the need to ensure the accountability of PPP arrangements in relation to the expenditure of public funds. In addition, it was intended to reassure all parties to a PPP that the required accountability, accounting management and financial arrangements met the necessary standards. While such accountability is necessary, I am now satisfied that this can be secured, and any necessary condition imposed, by means of the formal contract for the PPP arrangement itself. It should be remembered that PPP is simply another method of public procurement and that the appropriate Minister, together with the Accounting Officer of the relevant Department, will be responsible and accountable under the normal Government accounting arrangements.
It would be regrettable if this Act, which aims to offer reassurance and to encourage the private sector to become involved in PPPs in Ireland, was to have the opposite effect. The revised subsection (2) was drafted following legal advice to reflect the obligations of appropriate Ministers in relation to the implementation of Government policy. The removal of the detailed list of areas in which directions might be given results, inter alia, in the deletion of paragraph (p) as proposed by Deputy McDowell. The amendment proposed to page 6, subsection (1), line 11, is a technical one to reflect the updating of the Companies Act, 2001. Hopefully, the requirements have been met.
The amendment is a substantial improvement. I was one of those who expressed concern, when I met the unit in the Department some months ago, that the level of entitlement which the subsection conferred on the Minister was potentially intrusive. I am glad that such detail has been taken out of the Bill because it could have acted as a disincentive. I understand what the Minister is trying to do with the amendment as it is currently formulated, which is to allow the State to maintain the power, which it must have, to give policy directions. However, we need to tease out how that would relate to the specific terms of the contract.
The typical PPP arrangement or contract will deal with those kinds of policy issues and would normally oblige the private sector partner to observe any legislative changes that were made and to comply with such changes. We need to in some way relate the Minister's power under this subsection to give policy directions with the contractual provisions that are made and to specify which is superior. For example, the contract may specify that a certain measure of service be provided, such as the maintenance of a school from 9 a.m. until 5 p.m. for nine months of the year. Does this subsection mean that the Minister for Education and Science is entitled to come in with a further policy statement which changes that contractual arrangement? If the Minister for Education and Science decides that the school should open for ten or 11 months per year, can the Minister, by making such a policy decision, effectively change the specific terms of the contract? Which is superior?
The Deputy raises an interesting point. There is obviously an obligation to take account of the contract and that is in the legislation. There is also a provision in the legislation that if new legislation is brought in, there is an obligation to take account of that also. To use Deputy McDowell's example, if the school year changed dramatically and it was the common sense view that something different needed to be done, under the terms of the contract and within reason, the contractor must take account of a policy change which clearly affects the deliverability of the service attaching to the contract. The directions do not affect the contractual arrangements but deal with accountability, accounting management and financial arrangements. The directions are specifically intended to cover the accountability, accounting and financial affairs of that company in so far as the discharge of responsibility and delivery of public service is concerned. The purpose is to ensure that the appropriate Government accounting procedures are adhered to during the PPP process. I take on board the Deputy's interesting point relating to a possible major change in the school year, which could happen although I do not suggest that it will. I assume the Deputy is referring to the contractual situation of teachers if schools which are supposed to be closed for three months of the year are closed for just six weeks.
Yes. Ideally the contract should provide for the event of such a legislative change, but what would happen if such a provision has not been made? Is priority given to the policy direction of the Minister or to the contractual arrangements? I presume the Minister's policy takes precedence if a contract is silent on the matter.
My understanding is that ministerial policy would take precedence in such an event and that is what I said.
Should we provide, therefore, that policy directions should be subject to the terms of individual contracts? This would mean that if these matters are specifically dealt with in a contract, the explicit provision should be given priority.
It might not be dealt with in the contract. Under current legislation, contracts have to comply with ministerial direction.
What legislation?
Section 6(3) of this Bill states that "a State authority and a company shall comply with any directions given under this section".
Following on from my colleague's point in relation to schools, at present schools may be open for six months in a year, but it may become an objective in the future that schools open for 12 months, for example, to provide facilities for community based activities so that schools would be utilised rather than closed.
These matters need to be dealt with in contracts. When entering into a contract, the contractor and the Department have to be certain that certain commitments in relation to costs and other matters will be met. Contracts should reflect any dramatic change in the operation or organisation of any given asset, including schools, that may occur at a later stage. This may involve the renegotiation of the contract or another change in its parameters if the change affects the organisation of a PPP project. Contracts should include provision for meeting challenges that may arise if such a change happens.
I agree that such a provision should be included, but I am concerned that the amendments, if agreed, will effectively give the Minister the power to abrogate the terms of the contract, which, obviously, would not be a good thing.
The Deputy has made a good point in the sense that this area needs to be clarified. We may make further provisions in the guidelines for negotiation, if not in this Bill. The Deputy has made a good point that this needs to be considered in a fuller way than we thought heretofore. I accept that it should be specifically dealt with in the guidelines and I will consider another small amendment to this Bill on Report Stage, although I am not sure that will be necessary. I cannot say with certainty that I will table an amendment on Report Stage, but I will return to this issue if necessary, based on the discussion we have had today. The Deputy can take it from me that the manner in which he has raised this matter represents a good contribution to this debate. At a minimum, there needs to be more clarity in the guidelines in relation to the priority given to contracts and ministerial policy.
The Minister of State may need to tie the two matters in some fashion on Report Stage. I accept what he said.
It may be the case. I will take legal advice.
I thank the Minister of State for taking that point on board.
Amendment No. 24 proposes to include the words "or at the time of entering into a public private partnership". I am worried that the deal will not have been signed at the time of entering into a public private partnership so it is superfluous to include "at the time of entering into". If one has not signed a contract, surely one can renegotiate it. The Minister should be able to give a direction at that time to change the contract if he sees fit. It makes more sense to exclude "at that time" as the phrase is not needed. If one has not signed up to the agreement, it can be changed as part of negotiation with one's partner without recourse to this legislation.
The words "at that time" are part of the legal description we received from the Office of the Attorney General.
I ask the Minister of State to bring my point back to the Office of the Attorney General.
Deputies can take it that any matter raised here will be examined to see if it improves the Bill.
Amendment agreed to.
I move amendment No. 25:
In page 6, subsection (1), line 11, to delete "1999, at any time" and substitute "2001".
Amendment agreed to.
I move amendment No. 26:
In page 6, subsection (1), line 18, to delete "continued".
Amendment agreed to.
I move amendment No. 27:
In page 6, lines 20 to 40, and in page 7, lines 1 to 5, to delete subsection (2) and substitute the following:
"(2) In relation to a company that is formed and registered under section 3(2), an appropriate Minister may, without prejudice to the requirements of the Companies Acts 1963 to 2001, at any time after the company enters into a public private partnership arrangement, give directions to either or both-
(a) the State authority concerned, and
(b) the company,
concerning matters of policy in relation to the public private partnership arrangement concerned or such arrangements generally.".
Amendment agreed to.
Amendment No. 28 not moved.
I move amendment No. 29:
In page 7, between lines 5 and 6, to insert the following subsection:
"(3) A person seconded or transferred to a company established under this section or as a result of an arrangement entered into under section 3, shall not receive less remuneration or be subject to less beneficial conditions of service than the remuneration to which that person was entitled and the conditions of service to which that person was subject prior to the secondment or transfer.”.
This amendment effectively goes to the core of the concerns of the trade union movement and many workers in semi-State or direct State employment. The basic concern is that people working for local authorities will end up working for joint venture companies, including PPPs and the private sector partners of local authorities. Employees are worried that they will have to work for less money on less beneficial terms. I know the Minister will tell me that this matter is covered in the framework agreement between the social partners dealing with the issue, and it is right that this is the case. As this is such a core concern of individual workers and trade unions, there is a case for enshrining the framework agreement in the legislation which governs PPPs. I know that provisions similar to this have been made in legislation brought forward by other Departments and it seems to me that it would be a useful way to give the required reassurance to workers before they embrace the process as enthusiastically as we would like.
This issue, which has come up in many debates in which I have been involved, is an important one. The question raised by the Deputy's amendment is hugely important not only for PPPs, but right across the board. The lines between the public and private sectors are becoming blurred as closer working arrangements are introduced in a range of areas. The Government fully accepts that employees who transfer or are seconded to a company established under PPP arrangements should not have remuneration and terms and conditions of service worse than those to which they were previously entitled. A provision to this effect is contained in the framework for public private partnerships, which was agreed with the social partners and launched by the Minister for Finance last November.
I cannot accept Deputy McDowell's amendment for reasons which I will outline, some of which were signalled by the Deputy at the start of this discussion. My opinion, which is supported by legal advice, is that it is not appropriate to try to express the Government's commitment in this very specific Bill. The purpose of the proposed enabling legislation is to ensure that the State authorities listed in the Second Schedule have the power to enter into public private partnerships. An extensive body of law and regulation is already in place as regards terms and conditions of employment and remuneration.
These issues are properly dealt with in the legislation in the context of existing industrial relations machinery and EU developments. Indeed, a new EU directive is being worked on. It will represent very substantial legislation and will clearly cover this area as well as the questions the Deputy raises, about which I and my party feel equally strongly. Many issues are, quite obviously, principally matters for the Tánaiste and the Department of Enterprise, Trade and Employment, formerly the Department of Labour. I am not avoiding the question and I acknowledge that it is a very substantial one. The central policy unit of my Department is in the process of developing policy guidelines to address this and other key issues and any safeguards which are needed will be introduced through the appropriate channels and structures.
The principle of what the Deputy is saying is fundamental and I have no disagreement with the points he makes. The fact that there is substantial work going on at national and EU level is important, but it was equally important for the Government to ensure, in discussions with the social partners at the start of this process, that it enshrined that very tenet. The working conditions of those transferred should be no less beneficial. Many of those who have transferred are substantially better off than they would have been and they understand that where some of these projects have gone ahead. The negotiations with the social partners, specifically the trades unions, have gone extremely well. Everything is working extremely satisfactorily and I am very pleased about that.
I accept what the Minister of State has said and that he has said it in good faith. As a statement of policy it is very welcome. The question that arises is whether we need to enshrine it in law.
I would say in general terms that we do, but not specifically. I cannot deal with it in that way.
Our problem arises partly from the British experience where, quite clearly, the whole process of PFI was used as a way of casualising labour and of transferring people in public sector jobs which had a measure of security to jobs which did not. Frequently they were casualised and some of their previous existing legal rights were taken away. I realise that is not part of the agenda here, though quite clearly it was in the UK and that is where the difficulty arises. As regards the transfer of undertakings provisions, the directive was signed off on six months ago and has not yet been transposed into Irish law. Whether we are talking about the transfer of undertakings in that strict definition or as defined in the draft directive, I am not sure that the creation of a concession which would take over the responsibilities of, for example, the NRA amounts to a transfer of undertakings which would draw in the legal protection of the directive.
It is not clear to me and that is why I seek to make a very specific provision which clearly would provide the guarantees people need. It is informed by the simple fact that for the moment PPPs are fairly theoretical where the discussions have taken place at a national level between the social partners and the trades union movement, in the Department and in IBEC. Ordinary workers are distrustful of the process. They may be ignorant of it - I do not mean that in a negative way. They just do not know what is happening, or they are distrustful of it. Primarily their concern is to ensure that they, individually, are not going to be any worse off as a result. There is a good case to be made for making specific legislative provision which would give the sort of security people want.
I support my colleague in this amendment. It is necessary, notwithstanding the comments from the Minister of State, to tighten up the legislation and to have it defined. I had experience of this a number of years ago where people were transferred, against their will in many cases, from the semi-State to the private sector. There was an agreement that the staff who had to leave the State organisation would be treated no less favourably in the future and that their conditions of employment would not worsen, but that was not the case. There was a lot of mistrust and anger and it got to a point through a lack of legislation in this field that there was a difficulty with the company and it ceased to exist. People had to be drawn back into the semi-State sector. Looking at this legislation and PPPs, where a service is transferred we have to reassure people who may have no alternative but to move from a local authority or other area if they want to maintain their employment. The legislation has to be tightened up and this protection needs to be incorporated into it.
Amendment put and declared lost.
Question proposed: "That section 6 stand part of the Bill."
In relation to section 6(3), a sentence been incorporated to provide for something that seems to have already been covered. It says "a State authority and a company shall comply with any directions given under this section". It is a re-run of the first part of that section. Why has the Minister of State found it necessary to include a specific sentence, duplicating what is already there?
It appears that this will only apply to joint venture companies. Why is it not related back to section 3 and the agreements entered into under that section? Does it need to be linked back to section 3? Is it only going to apply to those joint venture companies?
We only want to give directions to companies in which State authorities have an interest. Our legal advice is to do it that way and that is why it is there.
While we are on the subject, does the Minister of State foresee that joint venture companies will be vehicles that will be commonly used, or does he expect that simple concessions will be given to private sector operators?
I have no doubt there will be joint ventures - in fact I would prefer it. As a result of my experience over the last five years in the Office of Public Works, my view has changed and is very strong. The combination of people from the public sector and the private sector working together often results in the best types of projects and caters for all the different interests in an improved way. I do not wish to see concessions given off to the private sector as that is simply transferring responsibility from one body to another to achieve the same end. A joint venture can bring together the best of both and that has been the case with State projects over the last few years. I will not discuss the National Gallery, but if you look at it, it is clearly a humdinger of a project and has brought the best of the public and private sectors together. The media will never write it up and credit it that way, but that is what has happened. Extending the sort of definition we have been used to into the PPP process, I would certainly like to see the joint ventures coming together and that is why the Bill allows the authorities to enter into them. That is its purpose and that is what will happen. It would be foolish of State and local authorities to delegate projects to private companies and say "good luck" to them. That is not what a PPP arrangement is: it is much more defined than that.
I agree with the Minister of State. We do not have very much experience of it in this country, but it would be preferable if joint venture companies were formed between local authorities and private sector operators for whatever purpose, be it waste management or water and roads projects. This is the better option. Regardless of the provisions of legislation and contracts, all of which are necessary, the day to day interaction of management and boards is probably a more effective way of ensuring that one gets the outcome one wants.
I should have informed the Deputy earlier that I completely agree with him on the PFI process in the United Kingdom. He is correct and it is interesting that the United Kingdom is now changing over to the Irish model which recognises, from the very beginning, implicitly and in every other way, the importance of the stakeholder interest. The trade unions, in particular, must have a stakeholder interest if it is to be delivered. There is no disagreement on this point.
Question put and agreed to.
SECTION 7.
I move amendment No. 30:
In page 7, subsection (4), line 27, to delete "For the purposes of this section," and substitute "In this section".
This is a technical amendment. Drafted following legal advice, it provides a more straightforward and correct wording.
Amendment agreed to.
Section 7, as amended, agreed to.
Sections 8 and 9 agreed to.
NEW SECTIONS.
I move amendment No. 31:
In page 8, before the Schedule, to insert the following new section:
"10.-The Minister for Finance will report to the Select Committee on Finance and the Public Service on a six-monthly basis on the operation of this Act.".
The amendment revolves around the question of accountability. All arrangements the Government enters into should be accountable to the Houses of the Oireachtas. One mechanism for reporting back is through the various committees. The Minister for Finance should report to this committee on all PPPs on a six monthly basis, providing an update on progress.
While I have no problem with accountability, I cannot, with good reason, accept this proposal. I have no disagreement with the Deputy on this matter. As I noted, the Bill is enabling legislation to ensure that the listed State authorities have the power to enter into PPP arrangements. It is not intended to deal with the reporting arrangements for public private partnerships. These issues will be dealt with under existing provisions for Government accounting and financial procedures. Furthermore, the central PPP policy unit of my Department is preparing policy guidelines for the conduct of PPP arrangements which will make provision for reporting and accountability of public private partnerships.
What sort of measures are being contemplated?
That is a matter for discussion. I will take the comments made by the Deputy, with whom I have no disagreement, on board. In general, there should be a mechanism to allow the Dáil and the committees to receive updates on what is happening. As matters stand, the committees already have considerable powers to do this. We will introduce into the guidelines reporting and accountability procedures. That is, I believe, what the Deputy seeks.
Amendment, by leave, withdrawn.
I move amendment No. 32:
In page 8, before the Schedule, to insert the following new section:
"10.-The Comptroller and Auditor General will be obliged to conduct an annual value for money audit of each public private partnership arrangement.".
This amendment is also related to accountability. Public money is being spent over which we need to exercise control. The appropriate approach would be to ensure the power to conduct audits on the companies which are formed comes within the ambit of the Comptroller and Auditor General.
Having received legal advice to the effect that it is neither possible nor appropriate to prescribe in the legislation what tasks should be undertaken by the Comptroller and Auditor General, I cannot accept the proposal. As Deputies will be aware, the Comptroller and Auditor General is an independent officer under the Constitution. The work programme of the Comptroller and Auditor General is, therefore, a matter for that office.
As I stated with regard to the proposed new section 10, my Department is preparing policy guidelines on best practice, accountability and reporting arrangements for PPPs. While it is envisaged that the VFM audits of PPPs will be undertaken, it would not be feasible for every PPP to be subject to an annual audit. Indeed, a VFM examination by the Comptroller and Auditor General of the recently signed schools bundle PPP has already begun. That is a matter for the Comptroller and Auditor General. I cannot intrude on what he does through legislation.
It is clear that under existing legislation and provisions the Comptroller and Auditor General has the power to carry out these audits.
He is already doing so. I trust this is of sufficient comfort to the committee.
Amendment, by leave, withdrawn.
SCHEDULE.
I move amendment No. 33:
In page 8, lines 10 and 11, to delete ", being the council of a county, the corporation of a county or other borough or the council of an urban district".
Amendment agreed to.
I move amendment No. 34:
In page 8, to delete line 23.
This is a technical amendment inserted at the request of the Minister for the Environment and Local Government to reflect the fact that the National Building Agency Limited is incorporated under the Companies Acts, 1999 to 2001, and its vires in relation to participation in PPPs should be properly contained in its memorandum and articles of association.
Amendment agreed to.
I move amendment No. 35:
In page 8, after line 24, to insert the following:
"A harbour authority within the meaning of the Harbours Act 1946.".
This is a straightforward technical amendment which was requested by the Minister for the Marine and Natural Resources. It is self-explanatory.
Amendment agreed to.
Schedule, as amended, agreed to.
Title agreed to.