National Development Finance Agency Bill, 2002: Committee Stage.
This meeting has been convened for the purpose of consideration by this committee of the National Development Finance Agency Bill, 2002. I welcome the Minister for Finance, Deputy McCreevy, and his officials to the meeting.
I suggest that we should consider the Bill until it is concluded today. I further suggest that, if necessary, we may suspend for a half-hour break for tea later, at a time to be agreed, depending on how long the meeting continues. Is that agreed? Agreed. We will now proceed to consideration of the Bill.
SECTION 1.
Amendment No. 1 is consequential on amendment No. 26, and both may be discussed together by agreement.
I move amendment No. 1:
In page 3, subsection (1), between lines 13 and 14, to insert the following:
" 'appropriate Minister' means any Minister of the Government-
(a) on whom functions stand conferred, or
(b) who has general responsibility, in respect of or in connection with a public private partnership or a State authority;”.
Amendment No. 1 is a technical amendment to define the term "appropriate Minister", which is used in amendment No. 26. That creates a new section in the Bill, which I am proposing. Amendment No. 26 proposes a new section that provides for a State authority to transfer assets to a company established under this Act. This could prove to be a most valuable provision as such assets could be used as core capital or to avoid a revenue stream to such companies to finance new infrastructure. In other words, assets which are surplus to the States needs, or under-utilised, could be used by these companies to finance the future infrastructure needs of the State.
Amendment agreed to.
Amendment No. 5 is consequential on amendment No. 2, and amendment No. 8 is related. Therefore amendments Nos. 2, 5 and 8 may be discussed together by agreement.
I move amendment No. 2:
In page 3, subsection (1), between lines 27 and 28, to insert the following:
" 'public investment projects' includes projects involving public private partnership arrangements;".
This is a technical amendment to clarify the term "public investment projects", used in the Bill. Amendment No. 5 is consequential on amendment No. 2 and inserts a reference to public investment projects in section 1. The text I propose to delete is no longer required as a consequence of that amendment.
Is amendment No. 8 included in this group, Chairman?
Yes, amendments Nos. 5 and 8, for discussion purposes.
This is the only opportunity I will get to speak to it?
The purpose of my amendment is similar. It should not be a case of advising solely on projects that would be undertaken by means of public private partnership arrangements. The way the section is drafted, it appears there could be, to some extent, a pre-emption of the sort of advice that would be offered. Advice would be offered only in respect of projects which would be duly undertaken by means of a public private partnership. The whole point of offering any advice is that the possibility should remain that public private partnership would be the wrong route to take in respect of such a project. I wanted to ensure that there would be no doubt that when offering advice this agency would not exclusively prejudice the case in favour of public private partnership as against the conventional State funding of a project.
If I understand the Deputy's intention correctly, the purpose of amendment No. 8 in relation to subsection 1(c) is to make specific provision for the NDFA to provide advice on all aspects of financing, re-financing and insurance of public investment projects undertaken by PPP arrangements. As subsection 1(a) makes provision for the NDFA to advise on the optimal financing of all public investment projects including those in the public sector, I can accept this proposal in principle. I wish to clarify the wording with the parliamentary counsel and therefore I propose to table an amendment on Report Stage incorporating the purpose of the Deputy’s amendment.
Amendment agreed to.
Section 1, as amended, agreed to.
SECTION 2.
Amendment No. 3 is in the name of Deputy Burton and amendment No. 4, in the name of Deputy Richard Bruton, is an alternative. As Deputy Burton is not present, I ask another member to move the amendment.
Amendment No. 3 not moved.
I move amendment No. 4:
In page 4, subsection (1), line 16, after "Finance" to insert "and Project Management".
I have examined Deputy Burton's proposal in amendment No. 3. The amendment proposes an Irish title for the agency. I agree that an Irish version of the agency's title should be included in legislation and I will accept the proposed amendment in principle even though it has not been moved. I propose to check the precise translation and introduce an amendment on Report Stage to meet the purpose of Deputy Burton's proposal.
The Chairman did not indicate that these amendments were being discussed together. The purpose of this is probably going further than the Minister is willing to accept. In my view, and as I expressed on Second Stage, the real problem in relation to a lot of the NDP is not the funding of the projects, rather it is the project management. As the Minister indicated there is a tendency to foolishly under-cost projects that subsequently turn out to be much more expensive. Even though the Department of Finance indicates there should be, there is rarely a re-evaluation of the benefits of the project in relation to the now revised and much higher cost that is occurring. Much of what we are seeing is poor project management with projects not being managed to come in on budget on time.
From an Oireachtas point of view we see virtually no information on the physical outputs of projects or their progress in relation to costs. It is a long time since I held any brief in this sphere but I recall an inquiry into the overrun of spending on a pier in Howth. One of the decisions taken by the then committee was that there should be an annual report indicating the cost overruns and the physical progress in each project. That was a discipline introduced by a committee of the Dáil to impose greater obligations in the reporting of project management.
If the Minister is going to the trouble of setting up a specialist agency to advise bodies on how they conduct and finance their NDP projects, he should include in its brief some effort to create a centre of excellence in relation to project management as well as funding. This is a broader question than the Minister possibly wishes to contemplate at this stage but it is one of the reasons that persuaded me to vote against this Bill on Second Stage. This Bill is not addressing the central problem we encounter about the delivery of the NDP. The Minister can borrow more even though he may be constrained by the stability pact. He may admit that some of the stability pact constraints do not make a lot of sense in economic terms. We should not create legislation to deal with some foolish structure of the stability pact. Rather we should introduce legislation to deliver quality projects on budget and on time. I am disappointed that having gone to the trouble of setting up this agency with its brass plate and its comfortable board seats and chief executive that we are not getting to the heart of what is going wrong with public project management.
I am opposing Deputy Bruton's amendment for the reason to which he has alluded. The proposed NDFA is not intended to undertake project management. The purpose of the agency as set out in section 3 is to provide advice and, in certain circumstances, finance in respect of public investment projects, including public private partnerships. It will be a matter for Ministers or, where there is a delegated sanction, accounting officers or equivalent to decide in advance the structure of projects. The management project will be a matter for the appropriate State authority.
Deputy Bruton has referred on a few occasions in the Dáil to the management of projects in relation to the national development plan. He partly raised this topic during Question Time today. There are procedures in the Department of Finance to evaluate and assess projects but the management of projects is carried out by the line Departments or the agencies under their remit. At this stage in the national development plan and, considering that we have spent the best part of €1 billion more than we intended and yet the plan is somewhat behind schedule, this means costings given to some of the projects were understated. Some of the projects were considerably understated by the line Departments. That is easy to understand in one sense in that there was rising inflation, particularly in the civil engineering sector. Even with that, some projects are a long way understated. The Department of Finance and the line Departments are endeavouring to ensure that line Departments give more realistic estimates at the start of a project.
I announced recent innovations, which I cleared with my Cabinet colleagues some weeks ago, in the budget regarding the estimating and management of capital projects. Departments must leave a fair gap in their Votes for unexpected overruns rather than saying that there has been an overrun and sending the bills to the Department of Finance. That applies not just to capital projects but to everything. I am sending the money on behalf of the taxpayer, it is not coming out of my pocket as some people seem to think. The NDFA Bill is not the vehicle to do this. Deputy Bruton has the idea that the NDFA should have a separate division to do with project management.
The purpose of this Bill is to finance and find the best means of financing capital projects from a wide variety of sources including PPPs. It is not to manage projects. I remind Deputy Bruton that this will be a very small agency. There will not be a clatter of people up in the NTMA called the NDFA. It will be a small number of people. A lot of the expertise is already there in the NTMA and we might as well use them. I do not believe that it will be a big organisation with hundreds of people. The proof of the pudding will be in the eating. The chief executive of the NTMA, Dr. Somers, believes in small teams.
Rather than prolonging the debate, can the Minister provide me an assessment of the application of the guidelines the Department of Finance published in respect of capital projects? I cannot remember if this was done in 1993 or maybe even earlier. It might have been 1983 for all I know. Essentially it outlined how projects should be managed by agencies.
It was published in 1994.
I do not believe that is being honoured by the Departments. Certainly we are not seeing any reports and the Oireachtas should receive a report appended to the public capital programme, PCP, that would give us some indication that they are complying with the very sensible guidance offered, which is designed to protect the taxpayers' money. In the short-term, I ask the Minister to furnish me with his assessment of how that is being applied. In the longer term he should consider requiring Departments that have projects greater than a certain reasonable threshold to append to the PCP to report on progress in those projects showing costs compared to projections, physical performance compared to projections and anticipated final costs for the project.
The Department of Finance is revising and updating the guidelines.
I did not say they are not being applied.
I will take on board what the Deputy has said and will furnish him with some up-to-date material on the matter. The Deputy has made a good suggestion regarding the public capital programme and perhaps we will build that into the guidelines also. It might make my job in dealing with other Departments somewhat easier.
Amendment put and declared lost.
Section 2 agreed to.
SECTION 3.
I move amendment No. 5:
In page 4, subsection (1)(a), lines 28 and 29, to delete “(including those involving public private partnership arrangements)”.
Amendment agreed to.
Amendments No. 6 and 58 are related and may be discussed together by agreement.
I move amendment No. 6:
In page 4, subsection (1)(b), line 31, to delete “repayable loans (including equity)” and substitute “moneys (including repayable loans and equity)”.
This amendment makes it clear that, as part of its function, the NDFA may advance moneys in respect of projects. I will propose a further amendment to deal with this issue in more detail. I can accept the principle of amendment No. 58 in the name of Deputy Burton. Following consultation with the office of the Attorney General, I will table an appropriate amendment on Report Stage.
I apologise for being late due to business in the House. I did not table amendments on Committee Stage because following my Second Stage contribution the more I read into the topic, the more concerned I became at the whole thrust of the proposition of the Bill. I am more determinedly opposed to what is proposed than I had been at the earlier engagement on this. I am deeply concerned that we are going down the road of the most expensive borrowing project and deferring major commitments on the part of Government and the Exchequer for some considerable time ahead. The more truthful option is indirect borrowing, which would be open to public scrutiny.
I may have concerns about amendments Nos. 6 and 58, but perhaps the Minister can guide me. Here we are discussing repayable loans, including equity and the arrangements with the English company Jarvis in relation to the construction of five schools, where a commitment of €214 million over 25 years has been entered into. I spoke of my real and substantive concerns shared, no doubt, by other Members of the House about the arrangement and relationship with such a company that has a very questionable track record in other areas of business in the neighbouring island of Britain. During the course of the summer recess we saw the resignation of a senior executive of that company.
Within the Bill, where is the Minister making provision for proper assessment of the suitability of companies with whom we enter public private partnership arrangements? The historical record based on the instance I have quoted gives rise to real concern. This was instanced by a colleague of Deputy Burton speaking in the House who asked if the Government would enter public private arrangements with the Russian Mafia. This company merits close scrutiny and I hope the Minister will give the necessary elaboration and assurances concerning such arrangements. I seek that clarification now, if the Minister is in a position to offer it.
I do not want to get into specific details about companies, but that company won the competition under EU procurement rules. It led a consortium that involved Irish builders and others. It was a very elaborate process, conducted under the aegis of the Department of Education and Science and the company won it fair and square. People at a recent meeting were so happy with it that they wanted to give it much more work. Procedures were fully adhered to by the relevant Department.
Nothing the Minister has said in response to me alleviates my concern. I have seen this at local government level where the criterion applied is the lowest tender received. This is not merely the tendering process for the delivery of toilet rolls to the local county council for the coming 12 months. This is a huge contract entered into for a period of 25 years with a significant overspend factor in terms of the physical works provided. Surely it is essential for Government to have arrangements in place to carry out a proper evaluation of the suitability of companies with whom it enters such technical detailed and very expensive arrangements, which commit public moneys over a period of a quarter of a century into the future.
In the absence of the necessary clarification at this juncture, I urge the Minister to prepare a more detailed response for Report Stage. It is of huge importance and it is imperative that the Minister and his Department examine how that can be addressed before proceeding with this Bill.
I apologise for my late arrival. The Minister is adopting a particular attitude. This Bill and these arrangements have been copied from the private finance initiative in the UK.
The fact that it is not is irrelevant, I suppose.
Let us say they contain a strong resemblance to the PFI in the UK. During the Second Stage debate in the House, I raised the question of the appropriateness of this model. The theory on which it is based is the transfer of risk from the public sector to the private sector. However, in the case of the schools to which Deputy Ó Caoláin referred, if Jarvis failed to complete the contract, this Minister and Government can walk away from a school. Equally, if a public private finance initiative undertakes to build and toll the road from Kinnegad to Mullingar, the road is a public good. It is not possible to transfer the risk. School principals will be falling over themselves when they hear that Jarvis or some other operator is willing to undertake the management of the project because the management of public service projects is now so complex that not only are local TDs needed to telephone Tullamore to help the eight people who manage school projects there, but the entire membership of a local authority is also needed. I know the Minister will reply that he is not the Minister of a line Department but I wish he would occasionally talk to his line Ministers because bureaucracy produced by this Government is strangling efficiency and the proper implementation of schools in new areas.
The Minister's response has been to throw the baby out with the bath water and to say that under the equivalent of the United Kingdom's PFI process there will be this new agency which has only an advisory role. On this basis, we will hand large volumes of contracts to public private partnerships. For the past couple of years, Department of Finance figures show that only 41 projects have been under consideration or have even got as far as the starting gate. The Minister now proposes this small agency of four people who will suddenly manage what whole Departments have not been able to get through - 41 projects. The agency will now do what the bureaucracy, consultation process, advisory groups and so on have done.
The key element should be that the private sector takes the risk. The Minister may have had the opportunity to listen recently to programmes and articles from the UK regarding the huge problems experienced with regard to Jarvis and the various public contracts it manages in different parts of the UK where teachers and principals and local authorities have completely lost confidence in this operator. The Minister is putting all his eggs in the private finance initiative basket. That is a risk for a small country such as Ireland with a complex bureaucracy and the Minister may yet rue this decision. One only has to look at what has happened with regard to these contracts already. I completely concur with Deputy Ó Caoláin's comments.
The Deputy cannot have it both ways. On the one hand, the Government is castigated for not speeding up the national development plan and for not building more schools more quickly while, on the other hand, a part of the Deputy's argument is that there is such a vast bureaucracy dealing with education that a local authority is needed to ring up the office in Tullamore regarding schools.
My next point is separate from the national development finance agency Bill and it is that one of the main reasons for the PPP approach is to expedite capital projects. There are arguments against PPPs, which the Labour Party and Deputy Ó Caoláin's party oppose. I readily understand that the political perspective from which the Deputies come is generally not in favour of PPP type projects. However, it cannot logically be complained that there was lack of speed in delivery of projects in the current system if something else is not allowed to take its place. One of the main reasons for pushing public private partnerships since I became Minister for Finance was to hurry things up. The Deputy is complaining about going down this road and then complains that only 41 projects are at this stage of the PPP process. With respect to Deputy Burton, in politics we all try to have our cake and eat it but this is to eat the cake and plate at the same time.
The purpose of PPPs is to expedite capital projects. We took on board the experience in the United Kingdom with the PFI and there have been successes and failures. We looked at other countries and came forward with our own approach. We have progressed gradually, not with the speed that I and some people would like, but it has been a learning process for all. We have tried to move things forward as best we can. It is fair to say that within the Irish public service at large, due to bad experiences in getting things forward to a particular stage and then pulling back, there is reluctance in line Departments and the Department of Finance towards PPP type projects. The Department of Finance is coming from the standpoint that the State will always borrow more cheaply than any company or individual. However, there are other reasons for having public private partnerships such as speed, delivery and effectiveness; it is a question of marrying the different concerns.
The Department of Finance looked critically at the different projects bundled together involving schools. The decisions were made by the line Department but my Department made its own decision to let the other Departments go ahead. The company that won did so fairly under EU procurement rules that were assessed by the relevant line Department and I will not begin to look back at that aspect. We must try to move on the PPPs but the national development finance agency has nothing to do with the management of the projects. The decisions will still be made by the line Departments and Ministers. The agency will simply offer advice on finance and suggest better ways of operating. That advice can be taken or not and Departments can operate in a particular way if they so wish. The expertise in the NTMA is to be used with regard to finance but the decisions will be still be made by the line Minister whether he or she wants to use the agency's financial approach. Deputy Richard Bruton wanted a separate project management element but I am leaving that aspect to the line Departments. This is only to do with finance.
I do not believe Deputy Bruton is as ideologically opposed to PPPs as the Labour Party and Sinn Féin, and I am not so opposed, as is well known. The previous Government, of which the Labour Party was a part, went ahead with some PPPs; they were not called that at the time but that is effectively what they were. The PPP approach in Ireland is not following the public finance initiative attempted in the United Kingdom. There are more safeguards built into the Irish process and a PPP framework was agreed after a long, two year process involving ICTU, IBEC and the Construction Industry Federation - I remember attending the launch. The principles and objectives of that framework guide all PPPs here.
This is not the United Kingdom. Under public private partnership in Ireland, there are safeguards regarding schools built into each contract. If the relevant company - in this case Jarvis - defaults, Barclays Bank loses its money because the unitary payments to Jarvis are only made if they meet demanding performance levels. The tenderers or teachers involved should be asked if they are satisfied with the new deal and I read recently in a newspaper that they are very satisfied. A back-up with one of the world's major banks is built into the process with regard to Jarvis. If anything happens in that regard, the back-up is there. Hopefully, in the near future we will have a PPP project signed up for a major road and similar safeguards will be built in there.
Schools built under PPP schemes return, in pristine condition, to the ownership of the State after 25 years. The schools that are being replaced did not last that long. The specifications for the PPP schools are higher than the Department of Education and Science's guidelines. It cost a little more to do it in this manner, but the schools in question are of a higher specification and better than traditional schools. The first step has been taken in this regard and all parties are happy. Like the United Kingdom, we will learn from the process. I respect the views of people who are not in favour of PPPs and I have no problem with them, but most Members of the Oireachtas, including me, are in favour.
There are different levels to this matter. Amendment No. 13, which I will propose later, looks for publication ahead of a decision to take the PPP route. This measure would cater for some of the genuine concerns about transferring risk to the private sector, etc.
As the Deputy and I are aware from business, one can never be certain of these matters.
No, but it seems that sometimes we proceed without thinking in advance. I would cite the sale of Telecom Éireann, a vital item of national infrastructure, as an example of something that was not really thought through. If infrastructure is owned by foreign investors with expensive capital to repay, will they maintain it to the standard necessary to keep "Ireland Inc." competitive?
All parties in Leinster House signed up to the privatisation of Telecom Éireann.
Perhaps they did so mistakenly. There should have been a White Paper to examine how the infrastructure can be maintained after 15 or 20 years, but I am certain that did not happen. I am worried about significant projects. IBEC has said that hazardous waste disposal and hospitals should fall under the PPP mechanisms. We will return to serious issues like where risk lies at the end of the day. I am seeking an objective analysis of the pros and cons of decisions to use the PPP route. We should be told why the Department or the agency believes that it is correct.
The Deputy should not confuse the Department and the agency.
The agency will make recommendations to the Department.
The Department of Education and Science and the Minister for the Environment and Local Government are responsible. The agency will give advice about finance and nothing else.
It will give advice in relation to PPPs.
It will advise about the financing of PPPs.
When the agency states that a PPP offers a better finance deal than borrowing, it is giving an imprimatur to the——
PPP projects will be brought forward by the relevant parties. For example, a financial package was brought forward by Barclays Bank as part of the schools project. They are a part of the overall deal, now that it is out in the open. If the NDFA was insisting at that time that the finance element of the deal was too expensive and that it would be able to finance it in a better manner——
The Minister may correct me if I am wrong, but in this Bill he is telling Departments that they must go to the NDFA if they wish to pursue certain projects.
No, it will advise them with their financing.
Yes, so they must go to the agency. The Minister is obliging Departments to go to the agency, even if they believe that a PPP is not the right way to go and that a conventional route would be better.
The agency will have a mandate for PPPs.
It will not. The Deputy is mistaken, perhaps inadvertently, if he has got such an impression from the Bill. The line Department will be obliged to ask the NDFA about the financing element of a given project. If we take schools as an example, the Department of Education would have been obliged to approach the NDFA if it had been established when the initial PPP school project was drawn up. I am not entirely au fait with the PPP project in the County Sligo school, but I am aware of it as Minister for Finance because my Department sanctioned it. The Sligo project consisted of Jarvis and Irish investors and the financial element of the package was handled by Barclays Bank. If the NDFA had existed at the time, the Department of Education would have been obliged to approach it for financing advice. The agency could have said that it envisaged a better method of financing.
The Minister should read section 8.
I will speak about section 8 in a moment. The NDFA could have said that the financing plan proposed by the Department of Education and Science was too expensive and could have suggested that it be done in a different way. The Department could have decided to accept or reject the advice, but it would have been informed by the agency's opinions. The purpose of the agency is not to say that a PPP project is good or bad, but simply to give advice about financial matters.
I am jumping ahead, but I would like the Minister to comment on section 8 of the Bill, which says "a State authority shall seek the advice of the Agency as soon as is practicable before undertaking a public investment project". If the Department is taking the conventional route of building a school - going to the Department of Finance for sanction and approaching the NTMA for a loan - it will be obliged to deal with the NDFA.
The line Department does not have to take the advice of the NDFA.
No, but it has to go to the agency. The Minister is incorrect to say that the Department goes with its funding package to the Minister for Finance for sanction for a loan and to an agency that may ask "is that the cheapest way?".
The agency will not assess the management of the project, but it will assess the financial package that has been put forward. That is the remit of this agency.
It will clearly be an advocate for a model that is not the conventional one. That is why we are not having it.
It will be an advocate of, in its opinion, the best financing arrangements.
Deputy Ó Caoláin has a point when he says that this Bill does not mention how the quality of the company that will be a partner will be vetted. I know the Minister will say that that will be the responsibility of the sponsoring Department, but the responsibility appears to be divided between the NDFA and the Department. It will fall between two stools.
If a contractor is going to build a school in Drumcondra or Dunboyne, the conventional approach is that the relevant Department examines the contractor in every respect, including tax clearance certificates, company office registration and the standing of the directors. It is a long time since I was involved in this area of the accountancy business, but a bond is usually involved. The same procedures will apply regardless of the company that is involved. As time goes by, most companies will be complaining about the rigidity of the compliance system.
I do not wish to prolong this discussion, which is like a Second Stage debate in so far as we do not seem to be mentioning the relevant amendments. I do not recall a recent initiative that received as positive a response from the public as this Bill. I encountered a similar response from the business sector at a chamber of commerce function and I heard this legislation being lauded by county managers. This country has been crying out for a measure like this for a long period and while policy issues may be at stake for left-wing parties, the bottlenecks in the public sector need to be relieved. The public is looking for public private partnerships and advice from this agency will help the PPP process. The feedback I am getting leads me to believe it will be a great success.
Deputy Finneran has ably summarised the failure of this Government over six years to get public private or simply public projects off the ground. In setting this up, one of the Minister's motives was to get some projects off the national accounts balance sheet. On Second Stage, we heard many references to the way EUROSTAT would treat these matters with regard to national accounts and Government debt, but the Minister has failed to produce a single sustainable argument. He acknowledges that the State is the cheapest source of money for capital projects.
The State is able to borrow most cheaply. The massive project management difficulties to which Deputy Bruton refers exist, yet the Government has piled on layers of bureaucracy in terms of assessment boards. However, if what the Minister says is true, why not make long-term schools and roads projects the responsibility of the NTMA? It has a very good track record in management. Why create yet another layer?
The NTMA is involved in debt management.
I foresee many of us standing in school halls before elections being told that projects are being sent to the famous advisory board. That constitutes a further layer of bureaucracy on top of the existing eight which already exist in the schools building process. County managers, chambers of commerce and harassed school principles were thrilled to receive the letters sent out before the election regarding the stages different schools projects were at. They are thrilled to see anything happening. The question we are addressing is not the desirability of something happening in relation to a badly needed project. We are asking whether the cost to the taxpayer will be higher in the long run. The Minister has said the State could achieve a better return, yet we are entering public private partnerships. It is being done for reasons of ideology which I do not find particularly attractive. In the experience of many other countries, public private partnerships have proven to be excessively costly because it has not been possible to transfer the risk in a public good entirely to the private sector. While we should return to the details of the amendment, that remains our dispute. The Minister has not been able to prove to us that the case is otherwise.
I doubt I will convince those of the opposite view after 35 years.
In his contribution, Deputy Finneran referred to chambers of commerce. Not all county managers would necessarily subscribe to the ideas outlined. The public response, which was also mentioned, is based on the public outcry of many here who seek new and refurbished schools in which education can be provided to children. The public look at immediate circumstances. It is to people such as we here to whom the responsibility falls to scrutinise and highlight the deficiencies and fine print of commitments made on behalf of the public. The Minister's response to the arrangements vis-à-vis the establishment of the suitability of companies such as Jarvis has nothing to do with their appropriateness. It has to do with their technical prowess and their financial ability to move on with the project. Other critical areas are not delved into. This is a company which has failed in its public obligation to ensure the safety of the rail network in key areas in the neighbouring island of Britain. That includes the example of Potter’s Bar where significant loss of life resulted along with many injuries.
These are warning signs. A non-executive director resigned on the basis of questions of corruption a few months ago. These important indicators of another layer of reality in such companies pose questions which are not addressed in this Bill. The Minister's responses confirm that the legislation does not seek to safeguard the long-term public interest, as we can see from the scale of the commitments and time frames involved. Following Second Stage, I went through contributions in great detail and, sadly, had to conclude that no possible amendment would make the proposition more palatable. That is unfortunate because I had an open mind with regard to it in the first instance despite my political outlook with regard to PPP and I wished to hear more. I looked forward to the engagement on Committee Stage, but I have had to conclude that I must oppose the Bill outright.
A generous and wide-ranging discussion on that amendment has been permitted. There is no harm in getting it out of the way, but from now on we will stick to the amendments which are before us.
Amendment put and agreed to.
I move amendment No. 7:
In page 4, subsection (1)(b), line 33, after “authority” to insert “provided that the opportunity to offer a financial package is open to competitive offer by other providers”.
We are setting up an agency to provide advice on the funding of projects to public bodies for which it will also put together financial packages. EU obligations provide that where an agency produces funding packages for a public body there is an obligation to open the process to public tender. It is a good idea given that there is a conflict of interest where an agency advises a body of the advantages of PPP and certain financial packages, which it then furnishes. The Minister has been conscious of that and has in mind a guideline, but the best way to ensure the conflict of interest does not produce bad results for the public is to put an obligation in place. Once the agency has advised a body of the best policy, be it lease, loan or PPP, a tender process should be initiated. I ask the Minister if there is an obligation on Government to refer legislation of this nature to the EU to ensure that it complies with competition law and treaty obligations. Can the Minister tell us if the legislation has been given a clean bill of health with regard to EU regulatory requirements? The EU is extremely sensitive about open competition and there may be a great agency in Finland which has made pioneering moves in this area and should, therefore, have an opportunity to offer its wares to public bodies here. This amendment is not only sensible, it may be legally required.
Section 3(3)(a) provides that the NDFA will be subject to compliance with guidelines, which I will issue, when carrying out its functions. These guidelines will be drafted by an interdepartmental group of experts subject to the advice of the office of the Attorney General. The guidelines will take full account of national and EU procurement procedures which are designed to ensure fair, competitive and transparent practices. For that reason it is not necessary to amend the functions of the agency. Consequently, I oppose the amendment.
Is the Minister providing a categorical assurance that an agency or group, which produces good financial packages, PPP partners or whatever else he is seeking, will be given a chance? The fact that the Department approached this agency does not give it an inside track.
Irrespective of the Bill, any decision which would give advantage to one group over all others is subject to the normal European Union procurement laws.
Are we not creating a conflict of interest in that this agency could, for example, advise the Minister for Health and Children and then offer him a package?
We will ensure the guidelines we produce, which will be subject to the advice of the Attorney General——
Will they be available before Report Stage?
No, we will draw them up after the agency has been established.
That is a mistake. I will press the amendment.
Amendment put and declared lost.
Amendment No. 8 not moved.
I move amendment No. 9:
In page 4, subsection (1), between lines 40 and 41, to insert the following:
"(e) to manage the investment on behalf of the National Pension Fund of moneys assigned by the Fund each year for the purpose of investment in infrastructural projects that yield an adequate return to the Fund.”.
The Minister will inform us the National Pension Reserve Fund is an entirely free agent with regard to the way it uses its money. It is, however, a scandal in the eyes of most ordinary people that the fund will probably have some €1.5 billion investment capital available to it this year, none of which will go towards addressing our infrastructural deficits. If one adds this to the cost of SSIAs, it accounts for all the Minister's borrowing.
We should facilitate the fund if, as can be envisaged, it wants to invest money in infrastructural projects at some point in the future. It may find this a worthwhile exercise, even if, in the short-term, the Minister does not intend to oblige it to make such investments. One of the functions of the National Development Finance Agency should be to offer a management support service to the National Pension Reserve Fund thereby ensuring its expertise in funding is made available to the NPRF, which will want good projects located in this country to yield a decent return. It would be a good idea to give the new agency this additional role. I hope the National Pension Reserve Fund will invest money in these projects in the fullness of time and that toll revenues generated by taxpayers will be allocated to funding their future pensions. Does the Minister agree this would be a satisfactory development?
There is nothing to prevent the National Pension Reserve Fund investing money in PPP type projects. The sections of the National Pension Reserve Fund give the commissioners total discretion over where they invest, subject to the provision that they achieve the optimal return. They have a completely commercial mandate. The fund can invest in infrastructural projects, presuming the commissioners assess the likely rate of return to be suitable in view of the level of risk. Given that the National Pension Reserve Fund commissioners are completely independent of the Minister and are free to invest in infrastructural projects if they so wish, the amendment is unnecessary.
Is the point not that the National Development Finance Agency will have no capacity to offer advice to the commissioners of the National Pension Reserve Fund and that the commissioners, as the Minster acknowledged in recent weeks, have been investing money in a falling equity market on a 25 year basis? To date, the only report of the fund's activities we have seen shows that its investments have lost a considerably amount of their capital value.
There is no report which states the fund has lost money. The commissioners report just once a year on 31 December. The last report, for 31 December 2001, showed a gain. Moneys from the fund had not been invested in equities at that point. The next report, for 31 December 2002, will be released some time next year. While there is speculation that the fund's investments in equities, as well as those of all pension funds with similar investments, will have performed poorly in the first nine months, let us wait to see how the year turns out.
In a country which is starved of infrastructure and has a series of infrastructural bottlenecks, the National Pension Reserve Fund has a 25 year outlook on its activities. The Minister spoke of 25 year projects. I support the amendment on the basis that many projects would be suitable for investment by the National Pension Reserve Fund, yet the new high powered National Development Finance Agency will not even have the power to send a letter to those who act as National Pension Reserve Fund trustees - I understand only one of them is a woman - calling on them to consider the possibility of investing in, for example, the construction of a new toll road near Kinnegad. The Minister should talk turkey.
The National Pension Reserve Fund is exactly the same as any pension fund, all of which are always on the look out for better investments and greater rates of return. That is the job of the trustees of any pension fund and the commissioners of the National Pension Reserve Fund are no exception. The managers of the various NPRF funds will examine various opportunities. There is nothing to prevent them investing in these projects - subject to prudence, the carrying out of an assessment of the optimal rate of return and the normal prudential management under which pension funds operate. There appears to be confusion among commentators and some politicians as to what the National Pension Reserve Fund should be doing. If they were to get the proper rate of return, many pension funds and life assurance companies would invest in PPP type projects. This is not the difficulty.
The Deputy should be aware that, since my appointment as Minister for Finance, I have increased the amount of Exchequer funding for capital projects from about 1.5% to more than 5% of gross national product, which is more than twice the European Union average. We hope to keep the figure at this level for as long as Exchequer money is allocated to capital projects. When I substantially increased the money for capital funding in 1998, 1999 and 2000, the price of capital projects increased because investing a large amount of money at one time creates significant activity in the civil engineering sector. Therefore, we got less of a bang for our buck in terms of return.
In recent times, we have heard some nonsense to the effect that the only answer to our infrastructure problem is to throw large sums of money at it. While this is a possibility, one must then expect, as happened when we sped up the capital programme, to obtain less of a return. It currently stands at more than 5% of GNP, with more than €5.5 billion allocated for capital projects next year.
Apart from the National Pension Reserve Fund, many funds, such as banks and life assurance companies, are dying to invest in projects which have a good return. The PPP type concept, not the normal Exchequer approach to doing things, will facilitate this kind of investment. The Deputy said we should take the normal Exchequer approach, namely, one which does not allow private finance to come in from the outside. The Deputy is contradicting her earlier arguments by moving in this direction. If she wants to do so, she will find the National Pension Reserve Fund very enthusiastic about these opportunities, subject to the rules I just mentioned. I will not give it any direction. I declined all offers of advice from various sources to restrict the operation of the pension commissioners in the National Pensions Reserve Fund Bill, 2000. As with a normal pension fund I went for the optimal rate of return and total independence of Government. I could have put all kind of provisos into the pension fund Bill and much of the advice to me was to do that, which I discussed at length both within in the Department and outside of it. I am glad that I chose the approach I chose.
The Minister is displaying a rather simplistic faith if he thinks the private sector can somehow defy the laws of supply and demand. The agency will try to bid for the scarce construction workers that are available. Because they are scarce the price will go up. That the Minister is recycling this money through a PPP as opposed to the public sector will not change the amount of inflation that is generated by excessive demand, which he says is at the root of the problem.
It was at the root of the problem a few years ago.
This will not change. This will not remedy the problem. That one gets faster delivery of a project through PPP will not alter——
Excuse me for interrupting the Deputy. Deputy Burton has been arguing for a number of months that the way to go is to throw more money at capital——
No, what Deputy Burton has argued is for——
——and borrow. One cannot have it both ways, because if we do then the price goes up.
We have been arguing for the Government to get its act together and manage the investment properly. The Government has introduced layers of bureaucracy, consultants and advisory groups. That is the root cause of the Minister's problem.
I was in full flight when the Minister interrupted me and provoked Deputy Burton into a response, so I feel I am still in possession. It is the view of most people, other than the Minister for Finance, that a body that is attracting €1,500 million of taxpayers money this year to invest should in some way have regard to the infrastructural needs of the country, subject to its independence and need to get a financial return and protect the interests of pensioners. This body will not pay out any pensions until 2035 or some such date so it will be different from other pension funds which will have a shorter term view. Most fund managers have to deal with a shorter view than this body can afford to have.
The amendment I am sponsoring does not put an obligation on the pension fund but it suggests to the new agency that if it is considering PPP or new funding sources then why not consider this body. It has €1,500 million to invest each year and should be considered as a useful source. Let us give this agency the power to offer some management services as well as the existing functions which are given to the agency. I am not seeking to undermine the Minister's stout defence of the independence of the pension fund, I just wish to give a slight nudge to the agency to regard this pension fund as a very good target and one which we in the Oireachtas would like to see tapped to fulfil some of our infrastructural deficits.
The Deputy just made my point that there is a contradiction here. The pension reserve fund will look for the highest return while the NDFA will look for the lowest cost to do a project.
That is the same in every deal. If one is selling a heifer——
The National Pension Reserve Fund is looking to go into a deal to get the best return on its money. The NDFA is looking at the project to give the least possible money to that institution.
Did the Minister never hear of a jobber at the fair?
I never heard it put like that.
The Minister has lost contact with his rural background. There are many tanglers in fairs that do nothing else but serve the interests of both buyer and seller to get a good deal for both. We are setting up a tangler so why not get it to make sure that one of the people it tries to bring together——
One agency is looking for the optimal financial return and the other is trying to give the lowest possible rate of return.
That is not the case. You are setting up a tangler here.
Both of our fathers were cattle dealers.
The principle is that it is the Department of Health and Children or the Department of Education and Science which will pursue their best interests and they have independence. The pension fund is another agency pursuing the highest return. This agency is a classic tangler and should be offered the opportunity to do a bit of useful work on behalf of the public.
Even Deputy Bruton would accept the contradictions
I would not accept them at all.
If the pension fund will not take up the opportunity of a PPP, who do we expect to take it? The Minister states that PPPs aim to make a profit. I assume they will look to make the optimum profit. Why should the pensions board not invest its money to make an optimum profit in the same way?
If the pension fund commissioners consider it desirable it can so do. There is nothing in the Act to prevent it investing in PPPs if it considers it to offer an optimum rate of return.
It might be encouraged to do so as it is our money that is paying for it.
I will not encourage that. The Act which was put through the House in 1999 gives the pension fund commissioners total independence, as is the case with pension funds in general.
Amendment put and declared lost.
I move amendment No. 10:
In page 4, subsection (2), line 42, after "functions," to insert "including the management of bond issue on behalf of executive agencies charged with the responsibility for developing certain public infrastructures, and".
There is an agency with responsibility for roads and one for housing. Presumably there is also an agency with responsibility for waste management. We have specialist agencies set up to do project management in specialist areas, yet as far as I know, none of them have the power to raise bonds to fund their work. This would help give them some continuity in funding instead of being dependent on stop-go funding that the Minister is able to make available to them. We must bear in mind that this year productive infrastructure is getting a cut of 17% in real terms. It is hard for agencies that are trying to deliver housing, roads or waste management and so on to manage if they are to be in this stop-go mode. Perhaps it would be sensible for this agency which will have a great deal of financial expertise at its disposal to manage bond issue on behalf of these executive agencies. The agencies could go to the NDFA with their projects and suggest that a bond be raised for a road project in order to be provided with some regular funding rather than having to go to the Minister year on year. It will still be part of the borrowing requirement and the Minister will still have to keep an eye on it. Dividing the funding and the management is a rather strange way to proceed and perhaps we should anticipate the possibility that bond issue might be a good approach to take.
I oppose the amendment. Section (3) (a) covers all of the functions of the NDFA, and provides that the agency shall comply with all guidelines that the Minister may issue. The functions to which this section refers are set out in section 3 (1) (a), (b), (c) and (d).
The Minister did not respond to the idea of the roads authority having the right to raise bonds through this agency. Does he envisage that this could happen?
I envisage the NDFA providing the optimal financial advice to all types of projects. The types of financial engineering companies it might come up with are limitless. I would not like to rule out anything it might come up with. The intention is that the NDFA will be the body to provide the optimal financial advice. I cannot see a role for the agency referred to doing it in the way that is suggested by the Deputy, but it may occur.
It has the merit of marrying the fund management and the financial management into the project management.
As the Deputy pointed out, that type of formula will count against the Exchequer in any event.
Amendment, by leave, withdrawn.
Amendment No. 12 is an alternative to amendment No. 11 and they may be taken together, by agreement.
I move amendment No. 11:
In page 4, lines 45 to 47, and in page 5, lines 1 and 2, to delete subsection (3) and substitute the following:
"(3) In carrying out its functions the Agency shall comply with all guidelines and instructions that the Minister may, from time to time, issue to the Agency.".
The purpose of amendment No. 11 is to provide greater clarity in relation to the issuing of guidelines and instructions by the Minister for Finance to the NDFA. Regarding amendment No. 12, I intend that the guidelines will be widely available. They will be issued to Departments and the NDFA and will be on the PPP and the Department of Finance websites. Therefore, I have no difficulty submitting the requisite number of copies of the final version of the guidelines to the Oireachtas Library. I accept Deputy Richard Bruton's amendment in principle and, having consulted the parliamentary counsel, I propose to table an amendment on Report Stage meeting its purpose.
I welcome that but I do not think the guidelines should be made available only in the Oireachtas Library. There are other approaches; one is to afford the Oireachtas the opportunity to positively affirm the guidelines as being those it would like the agency to adhere to. The other is to have 21 days within which to consider——
I have never come across guidelines that were treated by way of either a positive or negative motion in the Dáil. Perhaps the Deputy can give me some examples.
Usually, the Bill would read, "By order, the Minister shall issue guidelines." Such orders are binding.
I will publish the guidelines on the website and everywhere else the Deputy wants them, but I will not have Dáil motions relating to them.
The guidelines should not only be in the Oireachtas Library, but there should also be some opportunity for the House or this committee to consider, within 21 days, whether it is happy with them or recommends——
I do not think that is necessary.
I know the Minister does not think so because no Minister ever thinks it necessary to be accountable to the House. However, that is what we are here to do.
Did the Chairman put a time limit on this session?
We said at the beginning that we would proceed and that, if we considered it necessary, we would adjourn for half an hour. That is subject to agreement. We have not set a time limit.
I do not know how others have fared, but I have not had any fare today. I have just come from the Dáil and I would welcome a break if we are to complete this stage of the Bill.
I support Deputy Richard Bruton's amendment. The critical point is that the Minister is not only indicating that he is not consulting the Houses of the Oireachtas directly, but also deleting the provision that necessitates consultation with other Ministers. Surely this is not what we need. We want more consultation on the guidelines with other Ministers and the Dáil. The idea of laying the guidelines in the Oireachtas Library is totally inadequate. We want engagement and the opportunity to participate. The Minister should accept amendment No. 12.
The Minister's amendment will produce a much more unaccountable and distant agency which will be difficult for the Houses to scrutinise. I have tabled amendments that will try improve that. Not only does the Minister want the financial element off the balance sheet in relation to the national accounts, if possible, but he also wants to avoid any scrutiny by the House. We will regret this.
The Minister referred rather proudly to his own pet project, the National Pensions Reserve Fund, and pointed out that the latest available information on the investments of the fund up to 31 December of last year dates from last June. In terms of practical day-to-day management, the Minister knows from his own experience that scrutiny of information so far after an event has occurred is archaeological scrutiny as opposed to current scrutiny. The latter form of scrutiny would give the Houses of the Oireachtas a means of examining, on a reasonably timely basis, information and decisions made by the agency. I strongly take issue with amendment No. 11 and am very disappointed by it. It goes against any notion of transparency and accountability to the House.
I do not accept that a yearly report on the National Pensions Reserve Fund is insufficient. The fund had many purposes, but it was not designed to allow politicians to decide on the investment mandate of the agency or interfere——
On a point of order, we are not discussing the National Pensions Reserve Fund.
Deputy Burton raised the issue. I never heard of having politicians interfere and make decisions on a political basis regarding where an agency should invest. The Bill is drawn so that not even the Minister for Finance can give directions. It would be tempting to leave in residual powers for the Minister for Finance, as are left in most other Bills. This was discussed in the Department of Finance and I ruled against it.
It would not be possible to address reports of the National Pensions Reserve Fund Commission every month in the Dáil or for Deputies to be asking the agency what it invested in during the previous month. That would be absolutely ridiculous. Deputy Burton would be advising investment in one company and Deputy Connolly would be advising investment in another and the system could not operate at all.
As we live in an era of openness and transparency, the guidelines will be known widely and will be published on websites. Members could debate them in the Houses and I am sure they will table parliamentary questions, leaders' questions, Private Members' motions etc. Everything is open to scrutiny, as it should be.
We are elected to play a role which is separate to that of the Minister and his officials. I do not denigrate the role of the Minister, but as was said earlier in respect of a late colleague, we as elected representatives have a duty to ensure money is spent properly. As one can see from amendment No. 13, there are important principles of public policy at stake in the guidelines the Minister issues. At the very minimum, we should examine the guidelines and quiz the Minister in this committee. We should not engage in the charade that takes place in the Dáil, where one asks a question and the Minister replies in whatever way he likes. The Minister knows that only too well. This issue is serious in terms of how public projects will be managed in the future. If it is worth setting up this agency, it is worth having an obligation on the Minister to discuss the guidelines at this committee. If he changes those guidelines, he should come back to either the Dáil or an appropriate committee - I would prefer the latter - to be cross-examined.
I will table an amendment on Report Stage to allow for the presentation of the guidelines to this committee and for the Minister to come before it to be questioned. That would be a reasonable compromise. It would involve the Minister's returning to this committee, but I hope that is what he likes to do.
I do not agree with the Deputy.
I oppose this amendment. It is seriously flawed because it proposes the deletion of section 3(3)(b). I drew attention to this in the course of my contribution. It is a flawed approach and runs contrary to the spirit of amendment No. 12.
Amendment put.
The Select Committee divided: Tá, 7; Níl, 5.
Tá
- Finneran, Michael.
- Fleming, Seán.
- Lenihan, Conor.
- McCreevy, Charlie.
- McGuinness, John.
- Nolan, M. J.
- O’Keeffe, Ned.
Níl
- Bruton, Richard,
- Burton, Joan.
- McGrath, Paul.
- Ó Caoláin, Caoimhghín.
- Twomey, Liam.
Amendment declared carried.
Amendment No. 12 not moved.
I move amendment No. 13:
In page 5, subsection (3), between lines 2 and 3, to insert the following:
"(c) These guidelines shall require in respect of each project where a public private partnership is anticipated that an assessment shall be published in advance of the following:
(i) the principles underpinning the pricing policy to be pursued,
(ii) the provisions which will apply in the event that the project does not fulfil its revenue expectations for the private partner,
(iii) the method whereby the cost performance and physical progress of the project will be reported on a quarterly basis to the Oireachtas,
(iv) the cost benefit analysis and the analysis of the benefit of a public private partnership over an exclusive publicly funded alternative approach.".
This reflects some of the debate on Second Stage, during which considerable concern was expressed regarding what would happen in the event of a PPP project failing. One can envisage, for example, a waste management project or a hospital failing and it is unthinkable that the hospital would be closed down and patients sent home as would be the case if revenue did not fulfil the expectations of the private partner. In respect of such projects, we need to see what provisions are made in those circumstances ahead of an irrevocable commitment to the PPP route.
We want the agency and the Department to conduct a proper analysis of the benefit of PPPs over exclusively public projects. PPPs could offer considerable benefits on such projects as harbours, for example, but we must be conscious of the pricing policy that results from PPPs.
It is ludicrous that we build bypasses and apply tolls to them when the point of a bypass - if it is not congested - is to stop people going through a town and creating what economists call "negative externalities" or congestion in town centres. When a toll is charged on a bypass, people are encouraged to go through towns instead so such a public pricing policy is not in the public interest. If one is totally wedded to a PPP, one may end up with a pricing policy that is not in the public interest.
It is important that this agency and the sponsoring Department are not solely interested in the financial aspects and evading stability pact requirements - the dagger that unfortunately hangs over this. There is an incentive to evade the stability pact and allow projects to go off the balance sheet, but this is not in the best interests of transparency or public management. To counteract that we need assurances that these important public policy issues are examined in respect of major public projects, such as hospitals, which go down the PPP route but which would not normally be considered.
I agree with the Minister's and IBEC's view of the scope of PPPs being successful, particularly in the area of secondary care, but we must examine the issues and obtain assurances that the agency or the sponsoring Department has examined the issues satisfactorily and tells us who is ultimately responsible for ensuring that public money is used wisely. We also need assurances that they have considered and discussed the issues, including the possibility of the project going belly-up, the pricing policy, the alternative option of straightforward borrowing and how they will present a proper report on its cost and physical performance so we can see it is running it well.
I want the Minister to develop guidelines in these areas. Judging from his reaction to the last amendment, this is the last occasion on which we will have an opportunity to influence the guidelines of PPP adoption by either sponsoring Departments or this agency, which will be carrying the flag for PPPs.
In supporting the amendment, I remind the Minister that the most substantial example of a PPP is the West Link toll bridge. It advertises many of the good as well as potentially dreadful characteristics of PPPs. It provided a public investment at a stage when, apparently, there was no money to do so through normal channels. However, less than 20 years later, this PPP was renewed by the Minister's colleague without an open process when the second bridge commenced construction. The contractor, National Toll Roads, had a lock on the second bridge contract by virtue of having built the first bridge. Although I am not an economist, I am aware - as are the people sitting in their cars - that, in any economic analysis, we are now paying tolls to create one of the largest traffic jams in any European city. However, because of the Minister's ideological fixation with a sort of New Zealand model of replacing public service involvement with the private sector, we have gridlock. That gridlock is not just in confined to the unfortunate motorist, it also applies to policy.
Unless we have a degree of clarity and transparency in relation to how these decisions have been made and what exactly is the full assessment - including the alternative costs involved - we could end up with a series of repeats of the West Link bridge and the kind of suffering and cost that involves. We ask the Minister to be reasonable. We know he does not like to take advice, but he should consider the example of national toll roads and the West-Link bridge and what it is doing to the greater Dublin area and the country as a whole. It has certainly produced a stream of revenue, but by virtue of the inflexibility of the model and the lack of information available about how it proceeded, we are left with the most expensive traffic jams in Europe. It is doing serious damage to our economy and the Minister knows that. Therefore, I would support this amendment. The Minister should reconsider the desirability of having clarity, transparency and accountability concerning this important expenditure, for which taxpayers will ultimately pay.
The purpose of the NDFA, as set out in section 3(1) is to advise and, in certain circumstances, to provide finance on public investment projects. It will be a matter for Ministers, or whoever has delegated sanction - the accounting officer or equivalent - to decide on the appropriate financing structure of projects. It is not the role of the NDFA to undertake PPP assessments of the type envisaged by Deputy Bruton's amendment. This is a matter for the relevant Minister, accounting officer or equivalent, to undertake in accordance with the existing requirements and reporting arrangements, subject to audit by the Comptroller and Auditor General. Consequently, I oppose the amendment.
Deputy Bruton's amendment would mean all these guidelines would require all the matters as set out in subparagraphs (i) to (iv), inclusive. I do not propose to accept that proposal because this matter should be undertaken by the relevant Minister or the relevant accounting officer under the delegated powers of sanction. I take it from Deputy Burton's comments that she is opposed to all PPPs.
I am not. The Minister should not put words in my mouth. I said that one of the most substantial PPPs so far is not a great example. The Minister must acknowledge that, as he may even have been stuck in the traffic jams himself.
We will take that as one example.
I know the crossing very well and probably use it more than the Deputy. Was the answer then not to have erected that bridge, 50 or so years ago, and not to have any road at all? The State was not in a position to push forward with that. In fact, most people thought the proposals were a bit off the wall, as regards how we would ever make money on it. If I am not mistaken that was the concern people had at the time.
The fact is that it is so inflexible, Minister.
The State was not able to do it and most people said, "They will never make money on that".
George Redmond said that.
National Toll Roads came along with a proposition. Maybe we should not have put the crossing over the river. In that case, however, by my reckoning, we would not have the M50 going across the Liffey, so where would the traffic be then? We have only got around to doing it in recent years when we had the resources to build a bridge there ourselves. Instead of having the congestion going across the bridge, we would not have any way from south Dublin to the airport. Presumably then, the current volume of cars would be coming over O'Connell Street Bridge and heading out that way. We would certainly have achieved gridlock for the whole of Dublin, rather than for certain parts of it. I do not follow the logic of the Deputy's argument.
Is the amendment being pressed?
The West Link bridge uses the construction price index to up its charges each year. So it is using an index that is double the rate of consumer price inflation, and is getting massive increases in its toll each year. By any standards this has been bad value for money from the public's point of view. What is even worse is that they do not feel any obligation to install smart card technology whereby one could avoid paying a cash toll through having a detection device on the windscreen. If such technology was being used, drivers could avoid the congestion by driving straight through without having to throw coins into a net. It would have been preferable to have a sensible pricing policy in place. We should have anticipated how these public private projects would develop. In addition, we should have retained certain rights to ensure the public would not be excessively inconvenienced by the refusal of the company to invest in smart card technology. The company has not invested in this technology even though it has made a substantial return on the project. Maybe no one could have anticipated that four or five years ago, but perhaps they should have done so.
Before going down the route of NTL, they should have been obliged to think through the implications of tolling - how it would work and how congestion costs could be minimised. It is not rocket science to work out that a toll will require drivers to queue. These principles should be thought through. The Minister is trying to say that this falls back on the Departments but I know what will happen. The Minister will tell the Departments, "I do not have loan money. I am not going to extend my borrowing requirement beyond 1%", or whatever upper limit he has agreed to this year. He will tell the Department of Health and Children, and other Departments, "Go down to the NDFA and ask it how you will fund this project". They will come back with the PPP tolling idea and they will not be particularly interested in the impact of tolling on public policy on health or any of these spheres. The sponsoring Department will be desperate to get its project off the ground and so it will fudge this issue.
I do not accept that one can say this matter is a responsibility of the accounting officer. The Minister is forcing it into a corral and many such projects will have to take this route. We, the elected Members of the Oireachtas, are trying to protect the interests of patients, motorists and others. The Minister has an obligation to assure us that this type of thinking will be engaged in. They may get it wrong but at least they will have made a decent effort to anticipate the down sides. So, they will not shove the matter under the carpet and say, "Charlie McCreevy is a mean person. He won't give us extra money for this project. We have to take the other route". We must anticipate this will happen; spending always was and always will be like that. We need to insert checks and balances into the system so that the public interest is protected. This is not an unreasonable type of protection.
We do not have the opportunity to impose this on the sponsoring Departments but we can use the National Development Finance Agency, which will be the vehicle for doing so. This is where both sides - the sponsoring Department and the funding package - come together, so this is the correct place to provide protection. It will give us a chance to obtain some leverage over the process. We ought to take this step, even though the Minister's decision not to give this sort of role to the Oireachtas may reflect years' of accepted wisdom. The Minister should consider doing so, otherwise we will have disasters on our hands, and we will be saying, "Why did that hospital fail? Why did we not think it through?" One cannot price MRI scans at whatever level the market will bear, and not realise something will go wrong. Someone should be obliged to think through those issues and let the public judge. If they get it wrong they will be responsible for dealing with the problem, having thought it through earlier. This is all about responsibility and better value for money - the very things the Minister is talking about. This is the way to get it into the system.
I sympathise with much of what the Deputy has said, but the relevant Department or agency will do all that type of thinking. No one could have projected the fares due to National Toll Roads because they did not envisage the number of vehicles on Dublin's roads in 1998 would reach the volumes projected for 2011. Not even NTL anticipated that happening. The Deputy is trying to give a role to some unfortunate officials from the Department, which should properly be assumed by God.
That is absolute rubbish. The Minister for the Environment and Local Government only signed for the second bridge——
Nobody in the world will ever be able to visualise every possibility. I agree with Deputy Bruton that all these factors should be removed as far as possible, and they are. However, to suggest that somebody would have the foresight to take account of all the factors he mentions——
Is that not what investment appreciation is about?
That will be done, but to try to give it the role suggested by the Deputy is not envisaged by any assessment.
The national toll roads project arose when the former Taoiseach, Mr.Haughey, decided, like the Minster in the budget, to cut long-term public investment following his re-election in 1987. Only three or four years ago the previous Government allowed another bridge to be built by the same contractors following the same conditions, regardless of the public private partnerships mechanism and the well known congestion on the road in question. The Minister is reinventing history. The roads on either side of the bridge were built from the public purse. The Department's information on public private partnership is at pains to state that, in future, projects might not follow the national toll road model. The Minister should consult what he said previously and what his officials and commentators are saying.
Amendment put and declared lost.
Section 3, as amended, agreed to.
SECTION 4.
I move amendment No. 14:
In page 5, between lines 12 and 13, to insert the following subsection:
"(2) The Minister shall cause a copy of every policy direction and policy guidance issued under subsection (1) to be sent to the Agency.”.
This is a technical amendment in that it will ensure that the new agency will receive a copy of all policy directions and guidance to which it is to have regard under section 4(1).
Amendment agreed to.
I move amendment No. 15:
In page 5, subsection (2), line 13, after "advice" to insert "by the Agency under this Act".
This is a technical amendment to clarify that the advice referred to is provided by the agency under the terms of the legislation.
Amendment agreed to.
Amendment No. 17 is an alternative to amendment No. 16 and both may be discussed together by agreement.
I move amendment No. 16:
In page 5, lines 17 to 22, to delete subsection (3) and substitute the following:
"(3) In the discharge of functions under this Act the Agency and the National Treasury Management Agency shall at all times exercise due care, skill, prudence and diligence and act in the utmost good faith.".
The amendment provides that the agency and the National Treasury Management Agency "shall at all times exercise due care, skill, prudence and diligence and act in the utmost good faith." This almost amounts to a fig leaf to cover up the Bill's inadequacies. Is anything less expected than care, skill, prudence and diligence and the requirement to act in the utmost good faith? It is a significant watering down of an important requirement. As it stands, section 4(3) provides that policy directions and policy guidance "may each provide direction and guidance, respectively, to ensure that advice given under this Act shall be independent of any potential benefits that may accrue to the Agency or the National Treasury Management Agency." This is specific and important, which is why it was included in the Bill. By contrast, the amendment merely requires the agency and the NTMA to exercise due care, skill, prudence and diligence and to act in the utmost good faith. That is aspirational and non-specific. It does nothing other than demand best practice in the broadest sense of the term. By contrast, the provision in the Bill is a clear requirement that advice secured shall be independent of any potential benefits that may accrue to the agency or the NTMA. The amendment erodes the intention of the original drafting and it should not be accepted unless the Minister can provide a credible explanation.
My amendment No. 17 seeks to strengthen the protection afforded by section 4(3) because of the potential conflict of interest between offering a client guidance and then providing a financial package. One is a commercial transaction while the other is advice. There should be some protection to ensure that the advice tendered is not couched to promote self interest. The Minister's original drafting is the correct approach and I do not understand why he is now attempting to retreat from that other than that he has attempted but failed to draft satisfactory guidelines. If that is the case he should be honest and tell the committee of his difficulties.
My amendment seeks to address this by providing for a referral to the Competition Authority, which does nothing else but deal with potentially collusive agreements, to ensure fair competition and that these kinds of arrangements and agreements that develop in private business would not be anti-competitive in their impact. Anti-competitive in this instance means damaging to the interest of the taxpayers and the public. In view of this, I am bewildered by the Minister's decision to effectively delete section 4(3), which is sensible and necessary, when it should be strengthened.
The purpose of the amendment is to provide that the agency must discharge its functions with good faith. This is a substitution for the more negative wording of section 4(3), which deals more explicitly with the appearance of a potential conflict of interest. Deputy Bruton's amendment No. 17 is unnecessary. Section 3(3)(a) provides that in carrying out its functions, the agency will be subject to compliance with guidelines I will issue. These are being drafted by an inter-departmental group of experts and will be subject to the advice of the Office of the Attorney General. The guidelines will take full account of national and European Union procurement procedures, which are designed to ensure fair, competitive and transparent practices. In view of this, it is not necessary to amend the functions of the agency or to submit the guidelines to the Competition Authority. The agency will work on behalf of the Minister and my amendment sets this out more positively.
In drafting the Bill, the Minister and his Department were conscious of the potential conflict of interest, which is why guidelines are being drafted. Now we are being asked to accept in blind faith that he and his officials will consult with the Attorney General to ensure they are produced, but we will not see them before the Bill is passed. That is unsatisfactory.
On Second Stage I said the wording of section 4(3) was insufficient, but the Minister is now withdrawing it in the absence of an adequate replacement. Why has he decided it is unnecessary to deal with what is a glaring potential conflict of interest?
The Minister said his amendment is couched in more positive language. In what way is it more specific than the original provision? The original proposal is specific. I do not see that it is negative or that this is more positive. The original proposal meets the requirements of the section and the protections which need to be in-built within all of this. Therefore, I am at a loss to understand the preference for this formula of words which, at the end of the day, is merely pious aspiration. They do not substitute for ruling out potential benefits which would accrue and affirming the importance of independent advice. I fail to see how this proposal adequately replaces the other or is an advance. It is anything but that. It is a step backwards.
This agency and the NTMA are creatures of the State. The benefits which would accrue to anybody would accrue to the State and the taxpayer. Their operations will benefit the taxpayer either through the NTMA or the NDFA. It is not that they are in danger of giving benefits to some other person. The original subsection (3) was to ensure that advice "shall be independent of any potential benefits that may accrue to the agency or to the National Treasury Management Agency". The benefits are accruing to the State. The other way of putting it is more positive, that "In the discharge of functions under this Act the agency and the National Treasury Management Agency shall at all times exercise due care, skill, prudence and diligence and act in the utmost good faith.". Either way, it has to do with the potential which would accrue to the taxpayer via both agencies.
As this is a highly artificial creation, I suppose the problem that the Minister has ended up with is that he is creating distinctions between the NTMA and the new body. The new body is just like much of the other bureaucracy this Government has produced - it is actually not necessary at all - and the Minister now has to justify it.
Despite what the Minister said, there is a clear distinction between the two wordings. The formulation of words in the section provides a ringing declaration on the independence of the advice, that both agencies would be required to act independently of any potential benefits. It is a clarion call that they should act to the best of their ability in an independent way.
The Minister has replaced that wording with a formula behind which any accounting officer could hide. Who is to say that they will not act in that way? Has the Minister ever met a public body or agency which did not act with due care, skill, etc.? The second formula is much weaker.
As this agency is the Minister's creation, as part of the Minister's logic it is a horse which will become a camel by the time the committee finishes with it and I do not know what it will be by the time we get back to the floor of the Dáil.
Amendment put and declared carried.
Amendment No. 17 not moved.
Section 4, as amended, agreed to.
SECTION 5.
Amendments Nos. 20 and 27 are related to amendment No. 18. Amendments Nos. 21, 22, 23 and 24 are consequential on amendment No. 20. Therefore I propose that amendments Nos. 18, 20 to 24, inclusive, and 27 be discussed together by agreement.
I move amendment No. 18:
In page 5, lines 33 to 45 and in page 6, lines 1 to 11, to delete subsection (2).
By means of amendment No. 18, section 5 is to be amended by the deletion of the whole of section 5(2). This means that special purpose companies created under the legislation are not prevented from receiving funding and guarantees from the Minister. I am satisfied that this change is necessary to ensure that NDFA has adequate flexibility in discharging its functions.
The blanket prohibition in the Act as passed at Second Stage was overly restrictive. It is not envisaged that funding and guarantees will be given to all SPCs.
By means of amendments Nos. 20 to 24, inclusive, and No. 27, powers in the Bill are being extended to provide for the Minister to guarantee the debts of a special purpose company established under this Act. This is in line with the policy whereby additional options are being provided for. In practice it is a power that will not be used very often as it is likely that 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. Subsection (2) in the Bill as published is not compatible with the new section that I propose to insert under amendment No. 27 and accordingly must be deleted. Otherwise it would not be possible for the Minister or NDFA to exercise their powers under amendment No. 27. Amendment No. 27 for its part will give the Minister for Finance power to make funds available to NDFA on such terms as he 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 amendment will ensure that 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 could also 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% of the funding and the company would seek to raise the balance based on the cash flow from the project and without recourse to a Government guarantee.
This amendment also gives the NDFA powers similar to those of the Minister already described. The concept here is to provide for the Minister to channel money to a company via NDFA and to provide for NDFA, with the approval of the Minister, to use its own resources to fund a company in whole 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 will require share capital. This amendment gives the Minister and the NDFA power to contribute to such share capital which is of course essential.
These amendments are sensible. They represent an acknowledgement by the Minister that the model he produced on the floor of the House was deeply flawed ideologically and of the scenario to which several of us alluded earlier, that is, what happened the public good - the hospital, the toll road or the school - when the company collapsed or was in some ways inadequate. The Minister is now taking the power. I do not have a problem with it. I do not like this model but it is certainly appropriate that the State should have the power to intervene and to offer guarantees if that becomes appropriate, particularly as we are talking about public institutions which simply cannot be closed down.
I certainly welcome the rather limited change of heart. Perhaps the Minister listened to a bit of advice. He is shameless about not listening to advice. Perhaps he would tell us where this originated. I would be interested to know that.
In principle, this is a correct amendment. I suppose the misgivings I have about these companies is that the Minister does not seem to subject them to any form of accountability in the rest of the Act. They will not be subsidiaries of NFDA and therefore they will be independent entities.
They do not appear to have a reporting obligation imposed on them. Does the Minister envisage imposing some sort of reporting obligation upon them? If they will have State guarantees, they should certainly be obliged to report.
I welcome this change. I ask the Minister to explain further the circumstances in which he envisages these SPCs would have no State guarantee, where they would be entirely free agents which could collapse and the project could collapse with them and the circumstances in which he envisages they would not be such free agents where the State would provide a guarantee to ensure the projects would continue even if revenue streams did not fulfil expectations. I take it each guarantee must be explicitly approved by the Minister.
In what circumstances will guarantees be offered and SPCs formed without guarantees? What is the reasoning behind the two different models? How will they work in practice?
The Minister will hardly acknowledge this is a climbdown but, nevertheless, that is the note I made at the time. What were his reasons for deleting what for him must have been a key or substantive part of the legislation?
My thinking was influenced by what Members said on Second Stage and I thank Deputies Bruton and Burton for their contributions then. Section 5, as drafted, was too restrictive and would prevent the Minister from making guarantees or whatever at any time in the future. The purpose of the legislation is to ensure the State does not have to give guarantees or raise money but some packages could be put forward which would be attractive to the State. The State could say it would undertake a project in the full knowledge that it will hit the general Government balance for EUROSTAT purposes. It would not be appropriate to introduce a blanket prohibition, thereby preventing the State from taking up attractive projects.
Deputy Bruton asked about the circumstances in which no guarantees would be given. I hope very few guarantees will be provided. There will be none if charges such as tolls are part of the project. As I explained many times during the Fianna Fáil election campaign in the context of the NDFA and how it would hit the general Government balance, the furthest away is recourse to the State and the less impact it will have while the nearer it is, the more likely it is to have an impact and there is a large grey area in the middle.
Unfortunately, as many countries have found, EUROSTAT does not pronounce on events before they happen. It is after they come into play that it decides whether it will hit the general Government balance. That happened in Italy recently and there was a substantial case in Portugal over the past year or so where it had to recast all its figures to put it over the 3% general Government balance. EUROSTAT, therefore, makes those decisions.
The Bill will not be sent to Europe for approval. The Union is aware generally of Bills that are introduced in all parliaments and if it has a comment to make, it lets us know but we have not heard anything. The purpose of the section is that we do not want recourse to guarantees that often and the special purpose companies will stand on their own. There may be occasions when it would be appropriate to use them. Like those 15 or 20 years ago who did not visualise that thousands of cars would use the West Link bridge, I cannot visualise what type of financial and engineering products could come on to the market that might be attractive for these purposes.
The section will give flexibility to the SPCs. As the Bill was originally drafted, I was putting them in a straitjacket whereby they could never offer guarantees and the Bill would have to be sent back to the House to make changes. I took on board what Deputies said and this is what we are doing.
I am happy with the Minister's move. There will be hard tolls in a hospital or a hazardous facility but that does not mean that the project would close if something went wrong. It does not necessarily mean that if a project has a revenue source, it can be left off on its own with no guarantee and no recourse. That is a little concerning in terms of the practical use of the section.
It depends very much on how it is structured because the intent is that the recourse is as far away from the State as possible.
This goes to the heart of the issue. We should not distort good public management of capital projects to get over the stability pact. The pact is under scrutiny and will be changed. We should not create artificial structures that distort decisions in order to evade something that, hopefully, the Minister, with his persuasive powers, can change into a more sensible application while retaining the important ingredient of the pact whereby we have a mutual obligation to manage our financial affairs prudently.
With regard to amendment No. 20, one of the critical changes to its construction is the substitution of the words "raised by moneys" and "raised in" for the words "borrowed" and "borrowings". Was this necessary?
"Raised" includes borrowing.
What other means or methods are envisaged by the Minister? One of the critical arguments regarding public private partnership is that we should engage in borrowing if necessary and it is a more honest formula. The substitution of this construction of words will give rise to concerns that we are further hiding an act of deception, in other words, hiding the reality.
We have included the issuing of bonds and such financial products.
Does this represent a widening of the notion of what is envisaged in terms of borrowing?
There are other changes. The original section referred to the aggregate sum borrowed and so on while it now states: "The combined net aggregate of the principal of all moneys guaranteed by the Minister and outstanding (including the equivalent in the currency of the State of moneys raised in a currency other than the currency of the State) shall not exceed €5,000,000,000 in total." This is a small change to ensure we can do these other things as well. It is a tidying up provision to ensure we could raise money in the way we wanted.
Amendment agreed to.
Section 5, as amended, agreed to.
SECTION 6.
Amendments Nos. 56 and 57 are related to amendment No. 19 and all may be discussed together by agreement.
I move amendment No. 19:
In page 6, lines 12 to 27, to delete subsections (1) to (3) and substitute the following:
"6.-(1) Subject to subsection (2) and to such guidelines as the Minister may from time to time issue, the Agency may from time to time raise money in any currency.
(2) The combined net aggregate of the principal of all moneys raised and outstanding by the Agency and any companies formed under section 5 shall not exceed €5,000,000,000 in total, including the equivalent of moneys raised in a currency other than the currency of the State.
(3) The Agency may engage in transactions (including transactions in a currency other than the currency of the State) of a normal banking nature with the Minister and such other persons for the purpose of performing any of its functions.".
The deletion of lines 12 to 27 and subsections (1) to (3) includes the elimination of what might be regarded as safeguard clauses (a) and (b). Will the Minister elaborate on why these are being removed, difficult as it is to fully understand his thinking in the construction of this section? Why are these safeguard clauses being deleted?
The requirement to obtain the consent of the Minister for all borrowing is being removed. This matter will be dealt with under the guidelines because, from the point of view of administration, it is more efficient. The amendments will also ensure that the National Development Finance Agency will have explicit powers to undertake transactions of a normal banking nature. This is to avoid any doubt about its authority to engage in the broad range of activities in the financial markets required to ensure that it can access the most advantageous arrangements for financing projects. Other technical amendments are being made to remove ambiguity about the new agency's authority to borrow. I will propose an amendment to ensure consistency in such powers in the NDFA and National Treasury Management Association by applying powers under the Finance Act, 1970, to the NTMA.
The NTMA relies on the language used in section 54(7) of the Finance Act, 1970, inserted by section 118 of the Finance Act, 1983, namely, "transactions of a normal banking nature", in its derivatives transactions. It is, therefore, prudent that the Bill continues to use this provision.
Amendment No. 65 enables the NTMA, acting in the name of the Exchequer, to engage in financial derivative contracts, such as swaps, foreign exchange contracts, etc., for the purposes of managing the NDFA's debt. It is similar to the existing section 54(7) of the Finance Act, 1970, which provides for the use of such instruments in respect of the national debt.
Two circumstances are to be covered by the section. Where the NDFA borrows foreign currency, the NTMA may engage in swaps to eliminate the currency risk involved. Swaps in this instance are contracts between two parties providing for reciprocal payments relating to the foreign exchange movements of two currencies. The net effect of these payments will be to eliminate the foreign exchange exposure of the NDFA. The NTMA can eliminate its foreign exchange exposure by doing a further swap in the markets. As the NTMA is engaging in swaps in the name of the Exchequer, it can carry them out more cheaply than the NDFA.
Where the NDFA has a block of debt at a fixed interest rate which it wishes to exchange for floating interest rate debt, or vice versa, the NTMA may engage in swaps to facilitate the NDFA. Swaps in this instance are contracts between two parties where one pays the other a sum equal to the fixed interest rate on an amount of debt and receives from the other party a sum equal to the floating rate. In this way the parties can exchange their fixed and floating rate liabilities.
Amendment No. 57 relates to section 5 of the National Treasury Management Agency Act, 1990, 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. I am sure that is clear to everyone.
What the Minister said bears out the comments made on Second Stage. The NDFA is unnecessary and the Minister is living up to his election promises. He is reinserting into the Bill all the powers relating to borrowing, derivatives and managing money in home and international markets that already reside in the NTMA and, correctly, seeking to transfer them to the new agency. I do not disagree with his doing that and I am glad someone in the NTMA was awake when he or she read the Bill. Not to have the powers could have resulted in severe problems for the NTMA as managers of funds and borrowing.
It proves the point that this agency will be another layer and that the work could have been done by inserting the function of service into the National Treasury Management Agency and adding some clauses to the powers of that agency. I will not oppose the amendments and I welcome them. I have not, unfortunately, been able to listen to and absorb all that the Minister said in his statement of explanation. I am sure we can read it at a later date.
What Deputy Burton said is accepted. Nevertheless, one must recognise that there is a significant change in emphasis from eliminating or reducing risk to fixing or reducing the cost. That is not echoed in amendment No. 19 to section 6. Was it necessary to make the changes the Minister proposes and throw the baby out with the bath water, so to speak?
We have used the same language that was used in the National Treasury Management Act to allow this agency to engage in a wide variety of activities. It is taken from section 118 of the Finance Act, 1983.
Amendment agreed to.
Section 6, as amended, agreed to.
SECTION 7.
I move amendment No. 20:
In page 6, lines 30 to 40, to delete subsection (1) and substitute the following:
"7.-(1) The Minister may guarantee the due repayment by the Agency or any companies formed under section 5 of the principal of any moneys (including moneys in a currency other than the currency of the State) raised by the Agency or such companies, or the payment of interest on such moneys or both the repayment of the principal and the payment of the interest, and any such guarantee may include a guarantee of the payment by the Agency or such companies of commission and incidental expenses arising in connection with such moneys. The combined net aggregate of the principal of all moneys guaranteed by the Minister and outstanding (including the equivalent in the currency of the State of moneys raised in a currency other than the currency of the State) shall not exceed €5,000,000,000 in total.".
Amendment agreed to.
I move amendment No. 21:
In page 7, subsection (3), line 9, after "Agency" to insert "or any company referred to in subsection (1), as the case may be,”.
Amendment agreed to.
I move amendment No. 22:
In page 7, subsection (5), line 16, after "Agency" to insert "or any company referred to in subsection (1), as the case may be,”.
Amendment agreed to.
I move amendment No. 23:
In page 7, subsection (5), line 19, after "Agency" to insert "or any company referred to in subsection (1), as the case may be,”.
Amendment agreed to.
I move amendment No. 24:
In page 7, subsection (6), line 23, after "Agency" to insert "or any company referred to in subsection (1), as the case may be,”.
Amendment agreed to.
Section 7, as amended, agreed to.
SECTION 8.
I move amendment No. 25:
In page 8, line 7, after "project" to insert "and the Agency shall have a period of at most eight weeks within which to issue their advice".
This is the section where the Minister obliges every State agency with a public investment project to seek advice from the new finance agency. The Minister retains the right by guideline to exempt certain agencies from doing this. Some 300 to 400 agencies would be obliged by this section to seek advice from this small and efficient body we are establishing. The thought of that number of agencies or public bodies clamouring for advice from this investment agency on their myriad investment projects is mind-boggling.
An Bord Pleanála struggles to stay within its legislative requirement to offer its decisions on time. This is why I suggest in my amendment that, if the NDFA has not responded within eight weeks, the public body in question can proceed with its projects. It is to prevent it from becoming a stalling device, for example, for a school building project which could be deliberated upon by the agency for up to two years, whereas it was promised by the Minister that it would be built before the summer was out.
Was this before or after the general election?
The promise was made before the general election but appeared to evaporate afterwards. If many bodies seek advice from the agency and I do not know how many projects the Minister will require to be referred to it. There should be a limit in the legislation within which the agency must offer its response.
The amendment would place unreasonable demands on the agency. The NDFA will examine complex financial arrangements and may need to consult relevant financial institutions. Alternative financing packages may need to be researched.
The guidelines will specify the type and size of the project. They will not refer to small projects. They will be concerned with large projects. The Deputy's proposal is for a time limit of eight weeks before the agency must give its advice. That would not be possible in the case of the Luas or metro project.
Perhaps the legislation could refer to "no unreasonable delay"?
I will bear that in mind in the guidelines, but it would be unreasonable to place a statutory time limit on the agency in the same way as that which is in force in the planning area.
Amendment, by leave, withdrawn.
Section 8 agreed to.
NEW SECTIONS.
I move amendment No. 26:
In page 8, before section 9, to insert the following new section:
"9.-(1) Subject to subsections (2) and (3) a State authority may, whether or not for consideration, transfer, convey or assign its interest in any real or personal property (including leaseholds) owned or held by such State authority to a company formed under section 5 for the purpose of enabling such a company to carry out its financing functions in connection with public investment projects.
(2) A State authority shall not convey, assign or transfer any such property to any such company unless the consent of the Minister and the appropriate Minister has been obtained.
(3) A State authority may attach such terms and conditions as it considers appropriate to any transfer, conveyance or assignment pursuant to subsection (1).”.
Section 9, amendment No. 26.
I apologise for my late arrival. I am extremely worried by this amendment which will potentially cause line Ministers and, more importantly, chief executives of health boards, schools and colleges to lose a lot of sleep. It is a draconian measure which implies that if an institution such as a college was promised a major new development such as a replacement college somewhere in the city or town - perhaps the Minister will guide me here because I did not have time to read the amendment - a local authority, public body, college board or Department could be required to hand over some or all of their existing property.
That is a total misreading of the amendment which states that local authorities may transfer property. There is no compulsion involved, it allows them to do something if they wish as part of the overall project. The amendment reads as follows:
9.-(1) Subject to subsections (2) and (3) a State authority may, whether or not for consideration, transfer, convey or assign its interest in any real or personal property (including leaseholds) owned or held by such State authority to a company formed under section 5 for the purpose of enabling such a company to carry out its financing functions in connection with public investment projects.
(2) A State authority shall not convey, assign or transfer any such property to any such company unless the consent of the Minister and the appropriate Minister has been obtained [That would be the line Minister in the case schools].
(3) A State authority may attach such terms and conditions as it considers appropriate to any transfer, conveyance or assignment pursuant to subsection (1).
There is no compulsion. It is just an enabling section to allow State authorities to transfer property to a special purpose company.
The SPC company is not very well defined in the Bill. The legal conditions under which the SPC will operate are not very clearly defined, nor are there accountability requirements. I am concerned about the section because we are talking about a situation of total desperation where people want the new thing, yet State assets may be transferred. What safeguards are in place in regard to the imprudent handing over of State assets to special purpose companies if public bodies or authorities are forced to do so? This ties in with the whole nature of the Bill and the question of accountability in regard to the services being provided in the context of the public private partnership. I am not satisfied there are sufficient safeguards in place in regard to public property being handed over to SPC companies. What I am really dissatisfied with is the nature of SPC companies, which is not clear, yet the section could result in substantial tranches of public property being handed over to these companies.
This is just an enabling section to enable State authorities to transfer property if they so wish. The State authority must make that decision. Even if the board of a State authority makes a decision, the property shall not be transferred until the consent of the Minister and the appropriate Minister has been obtained. If a State authority over a relevant school or whatever decided it wanted to transfer property to an SPC for financial reasons, it would first have to get the consent of the State authority board and the relevant line Minister. These are ample safeguards for a State authority. One must assume State authorities act in the best interests of those involved. There is no compulsion on any State authority to do anything.
This is an unclarified and undefined area because, as the Minister knows, Departments or State companies have certain powers in regard to property, the use of property and its disposal. There is no indication in the Bill as to how the SPC may deal with these properties down the road.
Subsection (3) states that the State authority may attach such terms and conditions as it considers appropriate to any transfer, conveyance or assignment pursuant to subsection (1). Even if it decides to so do, and it is accepted by the SPC, the State authority can still attach conditions to the transfer to the special purpose company. What more can be done?
A lot more. If the Minister takes into account large public sites or land which may be transferred into an SPC company, up to now it would be possible for a health board to, for instance, use land for a multiplicity of purposes. If it goes into the SPC company, that company will remove the land from the remit of the public authority.
In the case of large tranches of land, none of the land may be subsequently recoverable for a public good such as a small part of the site being used for a crèche or some other public purpose. In the case of publicly-owned land, at least the promoters of the other public good for which the land may be used can appeal to the public institution, whether a local authority, Department of State, board of a college or whatever. In this instance, how will they appeal to an SPC for further public utilisation of the State assets or property which is now transferred to the SPC?
I do not want to sound too tedious in this regard, but the special purpose company would have been set up for a particular purpose to progress a project. A State authority might decide that the best way to progress the particular project would be to transfer some assets into it in order to proceed with a bigger project. Special purpose companies or other State authorities will not hold that asset for a period of time. The transaction will take place for a particular purpose in respect of a particular project. Special purpose companies, as the name implies, are set up for a special purpose. In order not to go too far into the realms of the ridiculous——
I am talking about practical examples.
——the State Property Act, 1954 allows State authorities to transfer land but it does not compel them to do so. It allows State authorities to transfer land to special purpose companies.
These special purpose companies may, in turn, be involved in a PPP of 25 years' duration, during which time they will effectively have control of the lands and properties transferred to them.
I represent a developing constituency in Dublin West. I deal with this type of problem all the time whereby parcels of land are in State ownership and a public purpose may be identified for some parcels of the land. Without more clarification of the functions of SPCs, I foresee substantial difficulties with the State effectively being locked out of the future use of its own assets which are locked into a PPP for a 25 year period. The amendment lacks flexibility. I ask the Minister to obtain some advice on the matter for Report Stage. I can give him a good reason for my concern but I do not want to do so in public.
This could turn the landlord and tenant law on its head. People have sold things which, had they held on to them, would have allowed them to make more money. Deputy Burton seems to be proposing that when they sell something they still hold on to it. We must be realistic about this. The State authority may decide to proceed with another project that may require the transfer of land to this special purpose company. It will be subject to all the provisos the State authority might have and the authority can attach conditions to it. I do not see this as being a big deal.
There are two key points. I do not object, in principle, to the selling of State property, I am concerned about what will be done from the proceeds of the sale. Outside this building today, representatives of prison warders were protesting about the disposal of Shanganagh Castle. There is much more involved in this than just the Minister.
Does the Deputy think the disposal of Shanganagh Castle is a good idea?
I do not think it should be disposed of.
Does the Deputy accept that the shareholder - the Government - can have a view on that?
As a Member of the Oireachtas, I represent a significant section of the people. It is not just the bricks and mortar that is being lost. What is being taken from the recipients of the service is scandalous. I have empathy with and regard for the protest and the views expressed by those delivering the service. Shanganagh Castle is only one example.
Does the Deputy accept that the making of a final decision is not just a matter for those employed? Not only their interests can be considered.
There was no consultation with them in this case. That is one of the faults in this proposal. There is a duty and responsibility to have meaningful consultation in these areas. As the Minister indicated, this is public property. I am concerned that the Minister is constructing a license to sell State property. For whose benefit is this being done?
If there are sound reasons for the disposal of State property I am sure I will agree with them. However, I am concerned about what will be done with the proceeds. The primary responsibility is the addressing of the critical infrastructural deficits that local authorities, not SPCs, must provide. An example would be a local authority public housing initiative that may go some way towards addressing the 50,000 plus household unit waiting lists in this country. Deputy Burton referred to child care earlier. We need community child care but the Minister's SPCs will not provide these.
Rather than embarrassing the Deputy any further I must point out that the amendment says ". . . such State authority or company formed under section 5 for the purpose of enabling such a company to carry out its financing functions in connection with public investment projects” and, therefore, it only refers to public investment projects.
I accept the wording the Minister read but it is non-specific. Local government is the real arm of the delivery of the type of services I have described. Local authorities are in the forefront of dealing with the need for public housing. Local authorities could be an avenue for the delivery of sponsored community child care State-wide. At present, there is a mishmash of services which fail to meet the needs of many children. These are only examples, but I do not believe the Minister has eliminated the specific concerns I have identified.
This amendment is necessary to allow public bodies to be effective under the provisions of this legislation. If a local authority wishes to build a leisure centre on an acre of land it owns, the most sensible thing for it to do is enter an arrangement with a special purpose company. That is certainly in the public interest. The same might apply to a ten acre town park that the local authority cannot afford to develop. I do not think this legislation would fit into the agenda of a State company were it not for this amendment.
I cannot understand the logic of what Deputies Burton, Richard Bruton and Ó Caoláin are saying. They seem to think something will be pocketed by the private sector. We are dealing with public investment projects, not pet projects of the private sector. The State companies may not be in a position to provide these projects but have an asset that can be effectively used to bring them to fruition.
I am concluding the discussion on this amendment as it has already been discussed with No. 1.
Amendment agreed to.
I move amendment No. 27:
In page 8, before section 9, to insert the following new section:
10.-(1) The Minister may advance moneys from the Central Fund or the growing produce thereof to the Agency or a company formed under section 5.
(2) The Agency may advance moneys to a company formed under section 5 on such terms and conditions as it may determine.
(3) Moneys advanced under subsection (1) or (2) may include moneys for the purpose of making an equity investment in such a company.
(4) The aggregate of advances from the Central Fund under subsection (1) shall not exceed €250,000,000.”.
Amendment agreed to.
SECTION 9.
I move amendment No. 28:
In page 8, subsection (2), line 19, to delete "the" where it firstly occurs and substitute "that".
This is a technical amendment to clarify that it is the NTMA rather than the NDFA that is being referred to in this instance.
Amendment agreed to.
Section 9, as amended, agreed to.
SECTION 10
Amendments No. 29, 48 and 50 are related, while No. 49 is an alternative to No. 48. These amendments may be discussed together by agreement.
I move amendment No. 29:
In page 8, subsection (1), between lines 26 and 27, to insert the following:
"(d) ensure that a report on the projects which it funds is provided on a regular and timely basis to the appropriate committee of the Oireachtas.”.
The purpose of this amendment is to ensure that a timely report is made to the appropriate committee of the Oireachtas on the projects funded under this new process. This would be different in that both the agency and the Department's secretary general would have a role in the project. In this new way of framing public policy it is important that the agency would be in a position to report on its remit in relation to these projects that emerge. That is the purpose of my amendment No. 29.
In the case of my amendment No. 49, the crucial decision here will be whether to go the conventional route. I understand the Department of Finance heretofore conducted comparators. If a project was being considered for PPP it ran an assessment of whether it was better to go the PPP route and I understand the Department of Finance was generally pretty negative towards a number of the PPPs which did not generate good value and it was probably right in most cases. Many PPPs represent a fancy way to get the public to pay more for projects and generate more expense on the Department of Finance. Rather than having the practical patriots in the Department of Finance holding the line, we will instead have people who have an interest in producing funding packages for PPPs doing this sort of work. We need to create an obligation on these agencies to account objectively for the choices they are making on behalf of the public. I have greater faith in the Department of Finance than in new agencies of this nature that are outside the tradition of public service.
That is not to say PPPs do not have a role. They have a role in certain cases. I would like to see strenuous obligations imposed on this agency to come to the Oireachtas and specifically account for the choices it makes. It will have a vested interest in offering advice that results in a PPP, because that is the route that involves its service. The Minister has removed the provision we had hoped would be in the Bill to ensure this conflict of interest would not be exploited or overused. That has been watered down considerably. This sort of provision should be put in but I would be afraid the Minister would not want to see it.
The Minister is a great man for telling us how much he wants value for money, accountability, innovation and people being held responsible for the good things they do and that we need a modern dynamic Public Service. If that is what we want, this is the quid pro quo. We give people responsibility and expect them to be accountable to us here. I hope the Minister will see the wisdom of this and will see that the cumulative wisdom of his Department, which has a sensibly conservative attitude to this, is born out of significant experience of charlatans who come along with ideas that are often not worth pursuing.
On amendment No. 29, it is not a matter for the NDFA to report to a committee of the Oireachtas on projects, which it funds. It will be a matter for the relevant Minister, Accounting Officer, or equivalent to report to the Government and Oireachtas in the normal manner in keeping with existing democratic accountability arrangements. I oppose this amendment. The requirement in section 18(6) for the chairman and chief executive of the NDFA to give evidence to the Public Accounts Committee, whenever so required provides for sufficient accountability by the agency for the performance of its functions.
I cannot accept amendments Nos. 48, 49 and 50. The policy on PPPs will continue to be a matter for the Minister for Finance and a central PPP unit in the Department of Finance. This legislation does not alter existing arrangements, but adds a financial advice dimension. The Department of Finance will continue to run the rule over PPP type projects and there will still be a central unit there.
Where will its advice surface in this great——
The PPP unit that was set up on my time there, gives advice to line Departments and the Department of Finance public expenditure division. It runs the comparator rule over any PPP proposal and gives it very close scrutiny. Many Ministers and officials from other Departments along with Opposition Members believe the Department of Finance is hell bent on refusing all PPPs. I have heard colleagues of Deputy Bruton ask why a PPP has not gone ahead in a particular area. I have not heard Deputy Bruton say that.
Maybe if I check the records I will.
The Minister will not. I am a sceptic.
To be fair, that is true. Perhaps he should take up residence in certain parts of the Department of Finance. This has been a very difficult battle at times.
They may be right though.
In many instances they are right and there is no greater defender of the role of the Department of Finance than I am, both in Opposition and when I came to Government.
Who will be the top dog? The NDFA will say——
The NDFA will provide advice for optimal financial arrangements. Before it comes to that stage, the relevant Department should have assessed this on the basis of the guidelines given to it by the Department of Finance. The NDFA is to determine the best financial arrangements of that package and may propose a different way of financing the project than the one proposed. The Department can take its advice or not.
At what point will we see the comparator?
I do not believe there will be any provision for the issue of comparators. Maybe it could be obtained under the Freedom of Information Act. We have done comparators in all the subjects to which the Deputy spoke earlier tonight. Some have been refused, much to the chagrin of some of my colleagues, so I have let go. I remind Deputy Bruton that I sometimes listen to the advice of the Department of Finance. This may come as a surprise to Deputy Burton but not to Deputy Bruton.
It must be all the women working there now.
I would not disagree with the Deputy on that.
My amendment seeks to provide some level of accountability and transparency by the National Development Finance Agency. The Minister is offering accountability, but only in the context of the aftermath of the publication of its annual report. In this section, we seek to create a facility whereby the chairperson and chief executive of the agency shall be available to come and give evidence before a committee of the Houses of the Oireachtas at the request of the appropriate committee. This House needs to have a role in scrutinising such an important agency as this one with large volumes of money being handled by it and through it through the mechanism of the SPCs. This is the minimum that is required.
I would not succeed in getting a chairperson or chief executive for this agency if the candidates thought that every time at the whim of an Oireachtas Member, they had to drop down and see such a Member. I am sure the people who will be chairman and chief executive of the NTMA will be very reasonable people and may volunteer to appear before committees. However, there is no point in setting up such public bodies, if Oireachtas Members want to do the work themselves. The purpose of setting up a body outside the Department is to let that body get on with it. It can then be judged and scrutinised and the appropriate place for it to appear is before the Committee of Public Accounts.
The Minister of the relevant Department and his officials can be scrutinised regarding the various projects but it would be unreasonable to agree with the amendment tabled that whenever required to do so by a committee of either or both Houses of the Oireachtas, the chairman and chief executive of the agency shall attend before the committee for the purpose of giving evidence. The project belongs to the relevant State authorities that decide on the structure and they are responsible for the project. The Deputy is trying to assume a role for the NDFA, which is not appropriate to it.
We are trying to ensure there is a modicum of accountability by the body.
I disagree with the comments the Minister has made about committees of the Houses of the Oireachtas suggesting they act irresponsibly. The committee system has been going long enough for the Minister to know the committees have not acted irresponsibly or wantonly in inviting executives of bodies to appear before them at the drop of a hat. This agency will be only remotely accountable because the accountability is built into the mechanism of the publication of the annual report which, as the Minister says, comes out once a year and probably six months in arrears. This means that the public scrutiny of this body will be effectively very limited.
Section 18(6)(a) states:
The Chief Executive Officer and the Chair-person shall, whenever required by the Committee of Public Accounts, give evidence to that Committee on-
(a) the regularity and propriety of the transactions recorded or required to be recorded in any book or other record or account subject to audit by the Comptroller and Auditor General which the Agency is required by or under statute to prepare,
This is followed by other subsections relating to accounts and audits.
I take the Minister's point absolutely. They are clearly in the context of the annual reporting to be done. The Minister has drawn attention to this earlier in his comments in relation to the national pensions reserve fund which reports once a year and he has defended that very eloquently. He is applying exactly the same reporting and timeframe standards to the reporting to this agency and I say that they are inadequate.
I always take a reasonable approach in these matters.
May I ask another question? There are a number of items still to be examined. I have not had a break since the Dáil commenced this afternoon. I do not know about the Minister but I certainly need food from time to time. May I ask what is the Chairman's intention because we have a number of other sections to go through?
What is the wish of the committee? We agreed at the beginning that we would see it through this evening.
Unless the Chairman is prepared to allow us some reasonable time to break for food, what we are doing at the moment is impossible. It is a very important Bill and it should be available for scrutiny. We lost time today because of the very deserved tributes to the late Deputy Mitchell. I would be happy to come in here early in the morning——
I have to be in Brussels.
Deputy Burton, we said at the very beginning that we would try to conclude the business today and we will consider a suspension of half an hour at some stage if committee members felt it necessary to do so. Is this amendment being pressed?
I propose to withdraw it at this stage but I put the Minister on notice that I would like to have an opportunity on Report Stage for the policies of this body to be scrutinised. I would prefer it to be scrutinised by any committee but I accept that perhaps it must be done by the Committee of Public Accounts. The remit drawn up by the Minister is extremely tight. The economy and efficiency of the agency is the only area under consideration. The public policy and the type of advice it will offer, how it handles issues such as advice in relation to tolling, should be open to scrutiny. The areas of economy and efficiency are too narrow and there should be no holds barred. This body must be held accountable for its policies and decisions. If a member of the Public Accounts Committee feels that a particular project funded by the body is a mistake and even if the Comptroller and Auditor General had not specifically adverted to it, the Public Accounts Committee would have the opportunity to question that. I accept that perhaps my amendment was too widely drawn but we need an amendment that is stronger than what is offered by the Minister.
Amendment No. 29 is being withdrawn. The other amendments discussed with this amendment will be voted on and moved when we come to those amendments. I propose that the committee suspend for half an hour.
Amendment, by leave, withdrawn.
Sitting suspended at 9.05 p.m. and resumed at 9.45 p.m.
We will resume our consideration of the Bill on section 10, amendment No. 30 in the name of Deputy Burton. Amendments Nos. 31 and 33 are related and may be discussed with amendment No. 30, by agreement.
I move amendment No. 30:
In page 8, subsection (2), line 28, after "members" to insert "one of whom shall be nominated by the Irish Congress of Trade Unions and one of whom shall be nominated by bodies representing employers".
I was heartened by the Minister's earlier references to the fact that this Bill was the subject of discussion among the social partners. From the way he eulogised the role of the social partners in the development of the concept before us——
Earlier tonight, the Minister mentioned specifically the degree of the work on this agency that was the product of——
Can I continue please? He described how much of the work was the product of very fruitful co-operation between his Department and——
The Deputy cannot misquote a person. ICTU, IBEC and the social partners were involved for a considerable period in drawing up the framework for public private partnerships. The National Development Finance Agency had not been mentioned at the stage that was agreed.
The NDFA is Fianna Fáil's mechanism for delivering PPP, assuming the 41 projects are continued. The Minister admits the projects have not moved very far. In the context of his laudatory references to the social partners, I am sure the Minister would agree that among the august people to be appointed to this small, select body there should be persons nominated by the partners. Such persons would take a long-term view of social needs. The two principal groups in the social partnership structure, ICTU and the employers organisations, are stake holders in society and it is appropriate that they should be represented given the long-term nature of the projects on which the new agency will give advice.
The proposed amendments make demands on the composition of the board which are far too restrictive. The agency has a unique financial remit which will require specific expertise. I will be mindful of the requirement for gender balance in sections 10 and 11 and will endeavour to ensure that the appropriate experts on the board of the NDFA are drawn from as wide a pool of potential appointees as possible. The board will be very small and will consist of a chairman and four ordinary members. The chief executive officer of the NTMA will be the chairman and it would be far too restrictive to allocate the other places to unions or employers.
The Framework Document on PPP resulted from a long discussion with the social partners which took place many months before the National Development Finance Agency Bill was conceived. There is no connection between the two as far as the social partners are concerned. The NDFA will be one of the vehicles used for developing PPP, but the framework agreements made with the unions, the CIF and IBEC were not conditional on such an agency's existence. That was never discussed because the idea was born as part of the Fianna Fáil election manifesto.
I am very disappointed with the Minister's response. His boss, the Taoiseach, favours the social partnership economic model and I have heard the Minister and other members of the Government speak at length of its benefits. I agree that social partnership has produced economic results. The Minister acknowledges that the NDFA is to identify line Departments and advise them with regard to financing of public private partnerships. However, the social partners are not to have any participation and their representation on the board is blocked. In the case of the composition of the board of the National Pensions Reserve Fund no interest was given to the representation of society's stakeholders. These important bodies make crucial decisions regarding large volumes of capital investment in the public sector. In the context of discussions to create a new agreement, I find the Minister's attitude mystifying and disappointing.
I am sorry to disappoint the Deputy.
My amendments involve a slightly different approach. Amendment No. 33 seeks to provide for public advertisement of the posts and for an interview of the applicants by persons of appropriate experience and independence. That is the basis on which people should be recommended to the Minister for appointment. It is foolish to allow the Minister to select members of bodies which require professional expertise. We should explicitly provide that such appointees are not friends of the Fianna Fáil Party or the Minister and that the selection should be based on an open competition. The Minister should establish an interview board which is confident will select people of good quality.
During my brief period as Minister for Enterprise and Employment, positions on the Competition Authority board needed to be filled. Until then, the tradition had been for the Minister to appoint people to the vacant positions. We decided to take a new route of placing an advertisement. The applicants were excellent and their expertise extended well beyond what we could have expected if we had proceeded using the traditional route of drawing up a list of names. As well as ensuring gender balance on the board, we met all our requirements. I know the Minister opposes the idea that his appointees should appear before the committee to allow members to satisfy themselves as to their expertise. The alternative is to ensure there is an open, competitive process for their appointment. This is the right approach.
Amendment No. 31 seeks to recognise that these decisions concern important projects in which the public has an interest. The agency's activities are not confined, as are the NTMA's, to fund management and the raising of funds at the minimum cost. The other dimension of its role is to advise on the type of funding package. This will mean deciding appropriate types of funding for public projects, appropriate tolling and pricing policies and appropriate measures to protect the public interest in respect of these projects.
The board of the agency must not be solely comprised of people with a background in finance or the stock market. The issue is too serious for that and requires a balanced membership. It should contain financial experts, particularly as finance will be the agency's main area of activity. However, it should also comprise persons with an understanding of the wider picture who recognise the requirements for running a public policy department, the objectives of public policy and the appropriate roles for pricing structures in relation to public policy objectives. Otherwise, the agency will become nothing more than an apologist for a particular type of funding and will have no regard for the public policy dimension. It is important, therefore, that the board is balanced.
I do not agree with either assertion. One could not argue, for example, that any of the persons appointed to the National Pension Reserve Board is not of the highest calibre. I searched internationally to find several of its members. The record in this regard stands up well. I am sure I will be able to find four ordinary members who satisfy all the criteria people expect to be filled for a board of this nature.
What does the Minister envisage will be the role of the board members? Will they be active in delivering financial packages or will they solely drive policy as non-executive members?
They will be non-executive members. The chairperson of the board will be the chief executive of the NTMA. Section 12(1) states:
12.-(1) The Board of the Agency shall, subject to this Act-
(a) ensure that the functions of the Agency are being performed effectively,
(b) set the strategic objectives and targets to be met by the Agency, and
(c) ensure that the objectives and targets are met.
As I understand it, the board of the Competition Authority has a much more executive role. This board will not act in that regard, but will act more in line with the boards of semi-State bodies. Members of the Competition Authority have executive, full-time positions because of its very specialised function. Members of the board will not be full-time and will not have executive functions.
What is the proposed stipend?
Some years ago I reclassified into three categories the remuneration of members of the boards of semi-State and State organisations and more general positions within them. The remuneration of the boards was placed in the same boxes as the remuneration of a chief executive. There are currently three categories. The National Pension Reserve Fund commissioners are a separate case as they do not fall into any of the three categories, whereas the members of all other boards do. While the categorisation was carried out by one of my predecessors, I have made some insubstantial adjustments to salaries in the past 18 months to two years.
I find the Minister's attitude incomprehensible.
One will not be made up by becoming a member of the board.
The new agency will oversee investments of very large amounts of public funds, yet the Minister refuses to accept the notion that stakeholders or representatives of stakeholders in society, for example, the Congress of Trade Unions or various employers' bodies, could possibly have something to contribute. While I am sure those he will appoint to the National Pension Reserve Fund are all eminent and excellent people, the characteristic which appears to define them is a background in finance, investment banking or pensions advice.
Despite what the Minister may think, when we talk about the State we are not referring to a private or public company, but to a country in which varied interests represent different groups in society. It is shocking, given the history of the Fianna Fáil Party, that the Minister is walking away from the notion that the various threads which make up our society, ranging from the trade union movement to employers' groups, should have the right to be involved in some way in decisions about very large amounts of public money.
The Minister could address this issue in many ways. If, as one might expect, he requires members of the board to have technical qualifications, I am sure the social partners can provide technically qualified people. However, we are all aware that many people in this House and other walks of life have made outstanding contributions to public life, despite not having technical qualifications on paper. One such person, about whom we heard earlier, was the late Deputy Jim Mitchell who was considered by everyone to have been extremely careful about the public interest and obtaining value for money from public funds.
I am disappointed that a Government that is heavily involved in the partnership process and of which the Minister is a senior member has chosen to lock the social partners out of participation on the board of management of this key agency, which will drive forward the Minister's commitment to public private partnership. It must be a first for the Fianna Fáil Party with the exception, perhaps, of the pension board.
The ultimate decision rests with the appropriate Minister who is democratically accountable.
That is a very poor response.
The social partners are represented in various arenas, including the policy groups of the NESC. I can appoint people to the board who will be able to make a contribution. I recognise the contribution made by the social partners. Nobody has a better democratic mandate than the elected Government of the day. The point in regard to the former Deputy, Jim Mitchell, is well made. He would be an admirable person to put on this board and if he had been alive I would probably have considered it. If I went down Deputy Burton's road I would eliminate two of the posts so I would not be in a position to appoint someone such as the former Deputy Mitchell, who would not have had many professional qualifications but would have been an excellent person to put on the board.
Looking at the Minister's record in regard to the——
He was a man with a broad vision who would not represent any of the social partners.
Absolutely. What will we get instead is the kind of people appointed to the National Pension Reserve Fund where the only objective is the markets and the only people who seem be on the inside track are those representative of the various international stockbroking firms and suchlike who are only interested in the business that will flow through. There is no stake holder interest by the broad sections of society who take part in the partnership process. The Minister's position is untenable.
As Deputy Bruton will vouch, I always like a surprise, so everyone will have to wait.
I know the Minister is not keen to accept amendment No. 31. He suggested he would consider someone of the type of Jim Mitchell, with experience of public policy issues who had a broad public interest rather than financial fund interests. I would like to see such an appointment - it could even be the Minister's party member, the former Deputy, Chris Flood. Someone of that calibre should be on the board so that there is someone to protect the public interest. We need someone who would question the right to introduce tolls of this nature. I fear that the pressure will be to get projects off balance sheet and that will be the primary drive of sponsoring Departments who will see it as an easier touch than having to go through the admirable officials at the Minister's side to get funding through the conventional public capital programme. This will be a softer touch and as a result there needs to be someone on this board to protect the public interest.
I will not fall out with the Deputy. It would have to be a very unusual item to fall out of the remit of the public capital programme. If it is done by the NDFA it will fall out with the Exchequer borrowing requirements programme. Unless it is very far away from the risk transfer it will fall within the general Government balance so we have to consider all the aspects of the matter. I am sure I will have the support of Deputy Bruton's party and Deputy Burton's party if I appoint somebody from the Fianna Fáil gene pool such as the former Deputy, Chris Flood.
I have no problem with anyone who has laboured in the heat of the sun but I would have a very different attitude to one of the hacks who has not held elective office and worked at the coalface. I would like to see former——
There are many admirable individuals involved in the partnership process who devote a great deal of time to it, be they from the trade union movement or the employers organisations, the farming groups or the various other pillars involved in the process. The Minister's essentially contemptuous attitude towards such people speaks volumes. They are fit enough to spend time discussing essential issues in regard to the country but they are not good enough to take part in a supervisory management board such as this. This is very disappointing.
I appointed former leading members of unions although they were active members of Deputy Burton's party who had been forgotten by previous Labour Party Ministers when they were in power. I will give the details to the Deputy afterwards. They were appointed at the highest levels. They were very grateful to be remembered by a Fianna Fáil Minister. I am also the Minister who introduced tax relief for trade union subscriptions, an idea which Deputy Burton's former leader would not entertain when he held my portfolio.
What has that got to do with anything?
My record in appointing people from the trade union movement and the social partners is second to none.
Amendment put and declared lost.
Amendment No. 31 was already discussed with amendment No. 30.
I move amendment No. 31:
In page 8, subsection (2), line 28, after "members" to insert "one of whom shall have relevant experience in public policy development and the appropriate role of pricing in the delivery of public services".
Amendment put and declared lost.
I move amendment No. 32:
In page 8, lines 29 to 31, to delete subsection (3).
This is in regard to the chief executive officer of the National Treasury Management Agency being chairperson of the board of the agency. I am not clear on the advantages of that. As I understand it, the Minister has re-introduced on Committee Stage, powers that would previously only have been invested in the National Treasury Management Agency and given them to this new agency so that they would be able to run a more seamless operation. Why would we want to have an overlapping role between the chief executive officer of the NTMA and the chairperson of this new agency?
It does not automatically suggest itself to me as being a particularly good way to approach it. The Minister is giving it its own functions and I do not see why it should be so much under the control of another agency, albeit the National Treasury Management Agency has experience in borrowing and debt management. This is a different function. As I understand it, the Minister is seeking to establish it to advise on best funding packages and to put them together. I do not see any merit in what is being proposed. Is the overlap based on the Minister's concept of good corporate governance? I would have thought it the norm not to have an overlap where there is an agency with separate functions. I am interested in hearing why the Minister thinks this is in the public interest.
I do not usually accuse Deputy Bruton of woolly thinking but that is the case here. In the earlier part of the debate and on Second Stage, I think I remember the Deputy saying "why not just set it up and let the NTMA get on with it?". I have chosen this way of setting up the National Development Finance Agency but it is closely connected with the NTMA. In section 9 there is a reference to the effect that subject to section 10 the agency shall perform its functions through the NTMA. It then continues with the National Treasury Management Agency. The executive officer of the NTMA is to be the chairperson of the new National Development Finance Agency, which reflects the close relationship and the complementary aims and expertise between the two agencies.
In the pension reserve fund Bill, there is an independent board and chairperson but the first manager of the pension reserve fund is the NTMA and the chief executive officer of the NTMA is one of the pension fund commissioners. This is an effort to use the expertise of the NTMA because there is a close relationship as the chief executive will be the chairperson in this instance. There will be four other board members and they will operate with the available expertise of the NTMA. It will not be a case of hundreds of bodies being behind it in a room. It has already advertised for those interested in becoming chief executive officer. It will have to take on a small number of people. It will engage expertise as it is required but much expertise is already there. I deemed it appropriate that the chairman of the board of this agency should be the chief executive officer of the NTMA.
I presume the agency's running costs will, in the course of time, amount to €2 million to €3 million per year. Another layer of bureaucracy is being added although the agency could function perfectly well as a division of the NTMA with appropriate and minor changes to the National Treasury Management Agency Act. It is an extraordinary waste of public expenditure. Because of the Fianna Fáil election promise, the agency is entirely owned and controlled by the NTMA, and this section of the Bill proves that. I do not know why it is necessary to have another separate board.
What is the connection between the Fianna Fáil election promise and the NTMA?
The Fianna Fáil election manifesto promised that the agency would be created. In respect of the proposals this agency is to advise on, there was an apparent hope that EUROSTAT would allow much of the funding to go off the State balance sheet . EUROSTAT and the parties to the stability pact have since changed their views. EUROSTAT prioritises substance over form, as the Minister well knows, and it will do so no matter how one dresses up State borrowing or a State project.
The circumstances that gave rise to the agency have now changed substantially. The parties to the stability pact have rightly taken a much wider view regarding how the conditions of the pact should be addressed. This agency is entirely superfluous.
I read about the role of EUROSTAT regarding the NDFA in a newspaper some months ago. EUROSTAT has no connection at all with the NDFA. Decisions made by EUROSTAT are made after events. It will consider any or all of these issues depending on particular projects. I had to attend most of the Fianna Fáil press conferences and launch the NDFA, during which I said it was very much a question of the nature of the risk transfer. EUROSTAT has not said anything at all to the Government regarding this legislation.
EUROSTAT said something to the Portuguese Government, to which the Minister alluded earlier.
EUROSTAT made its comments to the Portuguese Government in 2001, long before the NDFA idea was published in the Fianna Fáil manifesto. It made comments to the Italian Government in past months about sales of land. It says things to Governments all the time. It told us after the budget last year that certain items could not be counted for the GGB.
Nothing has changed with regard to EUROSTAT. At the Fianna Fáil election press conference, I gave examples of the figures we could raise. If the NDFA raised €2 billion per year in capital, maybe half would count against the GGB and half would not. I gave an example pertaining to the next five years. This information is in the public domain and it is demonstrated in the charts we published. Decisions regarding projects are made by EUROSTAT after the events in question. EUROSTAT has no bearing on this Bill.
How will the loans be managed by the agency compared to those pertaining to the NTMA?
The NTMA deals with the bonds and coupons raised in respect of the national debt——
A bond is a promise to pay. It is a loan in a layman's terms, although the Minister might call it a bond. The NTMA is raising loans in the normal manner by issuing bonds——
——and managing them for the State. The chief executive of the NTMA will be a chairperson of the proposed agency and he will raise separate loans. Am I correct in saying that these loans will not be general bonds, but specific to schools, hospitals or roads?
The companies raising these bonds will not, in most cases, have the benefit of a State guarantee. Therefore, the premium they pay on their borrowing will be substantially higher than that raised by the NTMA.
It will depend on the nature and risk of the project.
Will there be an independent person to ask if we are correct in opting for higher-cost, loans which are not guaranteed as against conventional loans? I presume the NTMA will get a higher commission on the management of these more complex individual bonds. There will be a higher management fee.
It will be opting to raise more expensive borrowings, which the State will still pay for, whether——
(Interruptions).
I need the protection of the Chair from continuous interruption. I am trying to understand the advantage in having many different bonds with higher associated premiums - hospital bonds, school bonds or others - rather than raising one bond that will cover all public projects and have low premiums or no-risk premiums, which is what the NTMA has always had. We are going down the high-risk premium route. I want to see some independence in this process. At every hand's turn, the Minister has refused to grant us the powers to scrutinise the decisions being made to opt for more expensive loan vehicles.
I have absolute confidence in Mr. Sommers and have no doubt that he is an excellent public servant. However, it is not good enough that we know his reputation is excellent; we need accountability. Perhaps the Minister is correct that there should be an overlap regarding the chief executive officer - I do not have a strong view on the matter - but I am uneasy that he is setting up a process we know will raise more expensive money than that raised traditionally by the NTMA. He will be involved with companies regarding which there is no proper accountability. Some companies will not have guarantees and we will not know what is happening. They will have no obligation to report to us and they will report to the agency itself if they report at all.
Does the Minister not understand that we are suspicious because this proposal originated in a political manifesto, it is a little obscure, not in the best public interest, and the Government is not willing to police it in the way we would like to protect the public interest? There are many people in the city very much to the right of the Minister politically who believe that public private partnerships are a rip-off and that they will be a rip-off for the taxpayer most of the time.
Earlier, the Deputy said he was in favour of public private partnerships.
These are different circumstances. They should be subject to proper evaluation and accountability
He is saying he is for them in certain circumstances.
He should be either for or against public private partnerships.
The Minister is being deliberately obtuse. Public private partnerships are sometimes a rip-off and sometimes good. They will be good if the private managers bring to the projects experience in marketing, management and promotion that we do not have in the public sector. The Minister does not propose any of those benefits. This is solely a funding mechanism and will offer nothing other than the transfer of cheap NTMA money into expensive SPC money. The Minister is expecting us to accept this as being in our best interest as an act of faith in him and his officials. Can the Minister not see why we might feel a little suspicious?
The decision will rest with the sponsoring Department or agency——
The Minister knows the Department of Education and Science has 400 schools seeking new premises. If the Department thinks it can off load this to a PPP by going to the NTMA, it will not care about value for money in the long-term.
The Department cannot do that because it is subject to the same overall capital controls I published in the Estimates. It cannot decide to spend €2 billion on building schools next year because that would affect the GGB of 0.7%.
Are they off the balance sheet?
That would certainly not be off the general Government balance without interpreting what EUROSTAT would say.
It would be on the current side. It is putting multi-million euro costs into a very expensive 25-year deal.
I assure the Deputy it will hit the GGB. When a Department is making such a decision the relevant Minister will have to explain it, either to the Dáil or a committee. The Department will ask for financial advice from the NDFA and can choose to accept or reject it. There will be an annual report and the chairman and chief executive will come before the Committee of Public Accounts. I do not see any difficulties in this.
It is legitimate to oppose public private partnerships, but one then must be against them in all circumstances.
I am on the middle ground.
Schools were mentioned earlier. The Department will be able to raise the money for those five schools more cheaply, but none of them would be built. Deputy Burton complained about the number of stages required to build a school. I would imagine those schools would only be at stage 4 or 5 as yet and would definitely be held up now. A balance must be struck.
The Department of Finance insists on all those stages.
Those are rules that have been developed over the years. The Department of Education and Science tried to streamline them and people are still complaining about it. The speed of delivery and higher specifications have to be balanced against the increased financial costs. Barclays financed the operation and Jarvis was the lead consortium, they can be called before committees of the Oireachtas.
The Minister will not give us the comparators. The Department of Finance has the information on these projects but will not release it.
The Deputy will be able to bring the Minister for Education and Science before the relevant committee and ask him what costs are involved.
The Minister for Finance is before us now and we want him to publish the comparators. It would be a step forward if the Minister will give an undertaking to publish Department of Finance comparators on every project. It would provide a level of accountability.
They are published after the project is completed.
In Britain, a survey of ACCA members showed that 57% believed PPPs, especially those for schools and hospitals, did not provide value for money in the long-term. Why is that the case? I know the Minister has great respect for accountants and the ACCA is a very conservative body. The national audit office in the UK described the yardsticks used to measure these projects as being pseudo scientific mumbo jumbo.
The Deputy and I disagreed on the issue of PPPs at the outset.
I do not support the kind of ones the Minister is describing. There is no accountability or auditing.
Let us consider the five PPP schools. A sixth school refused to join the programme because it feared delays, but it has not yet been built.
I am sure it has not because only eight people are working in the Department in Tullamore——
They may now have preferred to have been included in the bundle.
I can imagine that. Any school principal would be desperate to take anything that is offered. We have a responsibility to look at the long-term financial costs of the projects. We are not talking about the principals, parents or children who see something coming their way.
This is like beauty; it is in the eye of the beholder. Some people like the ideas of PPPs, others do not.
Amendment, by leave, withdrawn.
Amendment No. 33 not moved.
Section 10 agreed to.
Section 11 agreed to.
SECTION 12
I move amendment No. 34:
In page 10, subsection (3), line 1, to delete "3" and substitute "4".
The purpose of this is to increase the quorum. This board is very small and we have already heard the Minister say the chief executive of the NFDA is to be the chairman of the board. Yet, the quorum is constructed in such a way that it would be possible for this very important individual to be absent for a vote on major national projects. I find the quorum structure to be very unsatisfactory. This is to be the NTMA under another name and the quorum is too small.
I oppose this amendment. This is to be a five person board and having a quorum is quite reasonable. The board will consist of a chairman and four ordinary members. Deputy Burton's suggestion of a quorum of four would be most onerous. A quorum of three is adequate and reasonable.
Three wise men are to decide the economic future of the country and what economic projects are cut, amended etc. I think this is grossly irresponsible.
The Deputy knows that is not the way boards operate.
Amendment put and declared lost.
Section 12 agreed to.
Sections 13 and 14 agreed to.
SECTION 15
Amendments Nos. 35 to 39, inclusive, and 44 are related while No. 38 is consequential on No. 35. These amendments can be discussed together by agreement.
I move amendment No. 35:
In page 11, subsection (1), line 20, after "the" to insert "National Treasury Management".
As the NDFA will perform its functions through the National Treasury Management Agency, it is necessary to refer to staff of NTMA in this section, rather than staff of the NDFA. These are technical amendments to clarify this. The deletion of subsection (6) is made since the removal of a person from office in the NTMA is a matter for the chief executive of that agency.
Will the Minister advise us whether the terms set out in relation to disclosure of interests in the code of practice meet the requirements of the code of practice for the governance of State bodies issued by the Minister's Department in October 2001?
Will they in every respect?
What other respects are there?
We will return to it later when it is on the floor of the Dáil but I would like a checklist of how it meets those requirements.
Amendment put and agreed to.
I move amendment No. 36:
In page 12, subsection (6), lines 37 and 38, to delete ", including any office he or she holds (if any) in the National Treasury Management Agency".
Amendment agreed to.
I move amendment No. 37:
In page 12, subsection (7), lines 39 and 40, to delete "a member of the staff of the Agency or".
Amendment agreed to.
I move amendment No. 38:
In page 12, between lines 42 and 43, to insert the following subsection:
"(8) Where the Chief Executive of the National Treasury Management Agency is satisfied a member of the staff of the National Treasury Management Agency has contravened subsection (1), the Chief Executive of the National Treasury Management Agency shall decide the appropriate action to be taken.".
Amendment agreed to.
Section 15, as amended, agreed to
SECTION 16.
I move amendment No. 39:
In page 13, subsection (1)(c), line 7, to delete “the Agency or”.
Amendment agreed to.
I move amendment No. 40:
In page 13, subsection (3), lines 23 and 24, after "information" to insert "in accordance with law or".
This reiterates the point that information should be provided in accordance with the law. I hope the Minister accepts this as reasonable.
The provisions of section 16(1) are the same as otherwise provided for in law which allows for the disclosure of information where permitted or required by another enactment or rule of law. The amendment is, therefore, superfluous.
Is the amendment being pressed?
Amendment put and declared lost.
I move amendment No. 41:
In page 13, subsection (4)(a), line 26, after “is” to insert “reasonably”.
This section states that information that is expressed by the board or the Minister is confidential. The Minister can define anything to be confidential. This goes beyond what is sensible. The Minister and the agency or board must act reasonably. This amendment provides that information that is reasonably expressed by the Minister of board to be confidential should go into the legislation.
I do not believe it is necessary to use the word "reasonably", as the Deputy suggests. The Minister and the agency are obliged under law to act reasonably in the performance of all their duties so this amendment is unnecessary.
The difficulty is that this board is advisory and conditions of great secrecy that surround the operations of the board are in the Bill. We heard earlier how little accountability there is with the exception of an annual report, released six months later to various agencies. The insertion of the word "reasonably" would, for instance, protect a whistleblower where the agency was failing to carry out its functions properly.
It is unreasonable for the Minister not to accept this amendment because we should encourage good and careful practice. We have just seen the farce of the Abbotstown proposals which were the subject of inter-governmental wrangling and which have resulted in large costs to the public purse with nothing to show for them. The amendment proposed by my colleague is apposite in the circumstances.
I am not at all convinced by the Minister's argument that Ministers always act reasonably. We have ample evidence over the years to suggest otherwise.
Does the Deputy mean experience of his own colleagues?
I speak from personal experience over 20 years in politics that Ministers are not always even. I admit some colleagues of mine may not always act reasonably.
Excluding the Deputy himself——
This is not an unreasonable provision because it prevents boards from making stupid regulations about confidentiality. Any regulations made must be in accordance with some reasonable by a court or other body, that this is necessary to the exercise of its function.
Amendment put and declared lost.
Amendment No. 42 is in the name of Deputy Burton. Amendments Nos. 42 and 43 are related, amendment No. 54 is an alternative to amendment No. 43 and the amendments may be discussed together.
I move amendment No. 42:
In page 13, between lines 34 and 35, to insert the following subsection:
"(5) The Freedom of Information Act, 1997, is amended by the insertion in Part I of the Third Schedule of the following:
National Development
Finance Agency Act,
2002.
Section 16.
".
The purpose of these amendments is to make the new agency subject to the Freedom of Information Act, 2002, and having listened to the discussion and the Minister's contribution, I am more convinced than ever of the wisdom of the agency being subject to the Act. It is important in the public interest and I hope the Minister may be persuaded of the merits of the agency being subject to it. The agency will deal with public projects which are important to the State and different communities and the advisory decisions made by the board, unless available through the FOI, will remain for a long period a complete mystery. It would be unfair to those who are in favour or against particular projects that the information would not be made available under the Act.
The provisions of the Freedom of Information Act, 2002, will be extended incrementally across the wider public service as experience is gained in its application. It application to the NDFA will be decided in the context of the extension of the Act generally. In any event, the Bill contains significant provisions to ensure transparency and accountability. These include section 18, which provides for the preparation of annual accounts with the audited accounts to be sent to the Comptroller and Auditor General and the laying of those audited accounts by the Minister before each House of the Oireachtas. Section 18(6) requires the chief executive officer of the agency to appear before the Committee of Public Accounts and section 19(1) requires the agency to make an annual report to the Minister of its activities after which the report will be laid before each House of the Oireachtas.
These provisions will ensure that detailed information regarding the agency will be in the public arena. As I have already said, the question of the NDFA being subject to the provisions of the Freedom of Information Act, 2002, will be considered at a later date in the context of a general extension of that Act. Consequently, I do not accept these amendments.
Amendment No. 54 seeks the same end. I do not know why we spend so many hours here only to hear the Minister say that because a body turns up at the Public Accounts Committee or produces annual accounts, it does not have to be subject to the Freedom of Information Act, 2002. The Minister is trying to turn back history. Citizens have a right to this information - it is a right we have enshrined in law and this is an opportunity to ensure this agency, from the outset, is subject to it. Members of Fianna Fáil who have attended the committee faithfully must be persuaded that this process will not be transparent or open. We will not have access to any of the proper comparitors that would allow us to make judgments as to the soundness of decisions being made. It is wrong for the Minister to say it is premature for us to consider this body as being obliged under the Freedom of Information Act, 2002. We should operate within the culture of the Act but all the Minister offers is this threadbare excuse. He will set up this board according to his own manifesto, but is exempted from an obligation that every citizen should have a right to expect from public body such as the NDFA. That is not good enough.
This is the most pessimistic Committee Stage debate in which I have participated. I have debated with Ministers of all hues who have been willing to give favourable consideration to reasonable requests. It is surely reasonable to expect any agency established by a Minister to comply with public expectations.
The experience of bodies covered by the freedom of information legislation is known to the committee. The Minister is not excluding the possibility that this matter will be dealt with. I am sure details about the agency will be included in future information the committee will receive under the terms of the freedom of information legislation.
The bodies to which the Deputy refers are long established and have had to adjust their workings to the requirements of the freedom of information legislation. This is a new agency and from the outset it should recognise that citizens have an expectation of freedom of information. It should not be under any illusion that it can evade its responsibilities in this area.
Amendment put and declared lost.
I move amendment No. 43:
In page 13, between lines 34 and 35, to insert the following subsection:
"(5) The Freedom of Information Act, 1997, shall apply to the Agency.".
Amendment put and declared lost.
Section 16, as amended, agreed to.
SECTION 17.
I move amendment No. 44:
In page 13, subsection (1), lines 36 and 37, to delete "the Agency or".
Amendment agreed to.
Section 17, as amended, agreed to.
NEW SECTION.
I move amendment No. 45:
In page 14, before section 18, to insert the following new section:
"18.-(1) It shall be an offence for any member of the Board, the Chief Executive Officer or a member of staff of the Agency or the National Treasury Management Agency or a consultant adviser or other person engaged by the Agency to receive any improper payment from persons involved directly or indirectly with the promotion of a project or scheme under consideration by the Agency.
(2) All person acting on behalf of the Agency shall comply with requirements set out by the Public Offices Commission.".
An earlier section sets out the disclosure of interest required, but an aspect overlooked is the inclusion of a provision making it an offence to receive an improper payment. The amendment seeks to make this clear.
The amendment also seeks to provided that the Public Offices Commission should set out the requirements of those acting on behalf of the board in the context of the public office obligations of all State bodies, employees, consultants, etc. Deputy Burton has received an assurance from the Minister that this is the case. Perhaps he will outline the relevant provisions in the legislation.
Section 17 prohibits communications for the purpose of improperly influencing any matter which falls to be considered or decided by the agency. In view of this I am in a position to accept the amendment, subject to consultation with the Office of the Attorney General, and I will introduce any necessary technical amendments on Report Stage.
In view of the Minister's response I will withdraw the amendment.
Amendment, by leave, withdrawn.
SECTION 18.
I move amendment No. 46:
In page 14, subsection (2), lines 15 to 17, to delete paragraphs (a) and (b) and substitute the following:
"(a) a schedule of all loans and bonds raised by the Agency,
(b) a schedule of all repayments of loans by State authorities to the Agency on foot of repayable advances,
(c) a schedule of all advances of moneys by the Minister under section 10(1),
(d) a schedule of all advances of moneys by the Agency under sections 3(1)(b) and 10(2), and
(e) a schedule of all property transferred, conveyed or assigned to a company formed under section 5 in accordance with section 9,”.
This is a technical amendment to ensure that the accounting and auditing arrangements reflect all of the consequences of the substantive changes to other sections.
Amendment agreed to.
I move amendment No. 47:
In page 14, between lines 19 and 20, to insert the following subsection:
"(3) An account shall be prepared each year showing which projects have been deemed by Eurostat to represent funding which would be part of the General Government Balance and which projects have been deemed to transfer the risk of a project to the private sector and hence not deemed part of the General Government Balance.".
This relates to an issue we debated earlier. There should be an annual report detailing the parts of projects in which the agency is involved which genuinely transfer risk to the private sector. The latter is the test used by EUROSTAT in deciding whether a project is part of the general Government balance. As matters stand, the agency will take borrowing from the Exchequer balance but in most instances will leave it in the general government balance. However, in certain circumstances projects will be transferred entirely to the private sector. While EUROSTAT will have to make a ruling on projects on a case by case basis, this amendment provides that one of the agency's annual reports will outline which of its projects genuinely transfer risk to the private sector and, as a consequence, are removed from the general Government balance.
The question of whether a project is included in the general Government balance is a matter in the first instance for the Central Statistics Office and the Minister for Finance and, finally, EUROSTAT. It is not appropriate for the agency to become involved in reporting matters for which it has no function or competence. Consequently, I cannot accept the amendment. EUROSTAT will decide what projects are included in the general Government balance, it has nothing to do with the agency.
How will this be reported?
EUROSTAT makes decisions from time to time. It will also be clear in the Estimates and in the make-up of the general Government balance. There is no mystery about it. It is not for the agency to decide.
The Government will provide for it in the general Government borrowing and later EUROSTAT will decide on whether a project is to reported in the general Government balance, at which point the Minster will say the balance is coming in well below target.
I would have to outline the reasons.
Why not provide a report?
The budget documentation this and last year illustrates the link between the Exchequer borrowing requirement and the general Government balance. This year's documentation outlines the position for this year and the next two years. In last year's figures we indicated items that would be outside the general Government balance which EUROSTAT subsequently ruled should be counted against the balance.
Would the Minister agree to provide in the Budget Statement a list of the projects that have been deemed by EUROSTAT to be excluded from the general Government balance?
There would be no difficulty with that. In the first instance we will outline projects we consider should be included in the general Government balance and projects subsequently excluded would then be reported.
Large aggregate figures are involved.
They would not be aggregate figures unless an enormous amount of work is done over the next couple of years. All decisions would not be made at the same time. They will be listed.
In view of the Minister's comments I will withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment No. 48 not moved.
I move amendment No. 49:
In page 14, subsection (6), after line 48, to insert the following:
"(b) the cost effectiveness of the funding and delivery of any project in which the Agency has been involved, including the basis on which the decision was taken to opt for private partnership rather than conventional public funding,”.
I will not press the amendment, but on Report Stage I will seek that the Minister will provide that reports to the Committee of Public Accounts are of a broader nature than is currently envisaged and will include the general policy positions adopted by the agency where it provides advice or funding packages. It is important that the Oireachtas gets an opportunity to see the sort of policy thinking behind the advice and does not simply deal with the fairly narrow issue of efficiency and effectiveness, which constitutes the normal reporting to the Committee of Public Accounts for which the Minister has provided.
Amendment, by leave, withdrawn.
I move amendment No. 50:
In page 15, between lines 12 and 13, to insert the following subsection:
"(7) The Chief Executive Officer and the Chairperson shall whenever required by a committee of the Oireachtas give evidence to that committee on any projects with which it is involved that fall within the terms of reference of the said committee.".
In principle, there should be such a provision. The committee would not seek this often, but the option should be available. We should envisage this possibility, obviously subject such requests being reasonable. We do not want there to be unreasonable requests, but the committee would not impose such requests. There would be instances, however, where the advice of this agency to a committee would be deemed appropriate. It is worth providing for such instances.
Amendment put and declared lost.
Amendments Nos. 52 and 53 are alternatives to amendment No. 51. I propose, therefore, that amendments Nos. 51 to 53, inclusive, be discussed together by agreement.
I move amendment No. 51:
In page 15, lines 13 to 22, to delete subsection (7).
I found this section the most draconian regarding the limitations on the freedom of expression and accountability by the chief executive and the chairperson of this board. Essentially, if a project like the one at Abbotstown was wisely referred to NTMA or NDFA for advice, the chief executive and the chairperson, if required to give evidence to the House, would not be able to "question or express an opinion on the merits of any policy of the Government or a Minister of the Government" or "produce or send to a committee a specified document in which the Chief Executive Officer or the Chairperson questions or expresses an opinion on the merits of any such policy or objectives."
Earlier, the Minister went to great pains to mention that this was a new way for projects from line Departments to go to this advisory agency. However, in terms of the reporting and accountability of the chairperson and chief executive of this agency to the House, both persons are to be prevented from giving any information or documents on their advice or opinion which in any way reflects on the merits of Government policy. They might as well sign the Official Secrets Act.
It runs completely contrary to the notion of the strong minded independent advisory board which would be searching out and seeking value for money and ways and means of essentially pushing forward and speeding up public projects. It certainly indicates a desire for a paranoid form of secrecy on the part of the Minister for Finance. What have the Minister and this agency got to hide? Why is he so unwilling to allow a modicum of accountability to the House? I call for the deletion of this subsection.
Like Deputy Burton, I have serious misgivings about the way in which this subsection is framed and I have offered an alternative version. Rather than deleting the entire subsection, amendment No. 52 provides that the agency would only express an opinion the merits of policy where this is relevant to the efficient use of public money. That is the issue for which it would be responsible to the Committee of Public Accounts, according to the legislation. Under subsection (6)(b), the agency is obliged to report on “the economy and efficiency of the Agency in the use of the resources made available to it under this Act”.
We could quite feasibly envisage a situation where some of the €5 billion being made available to the agency under the Act could be devoted to Stadium Ireland or similar projects. We would have a right to expect that the Comptroller and Auditor General and the Committee of Public Accounts would have an opportunity to hear the expert view of the chief executive officer and the chairperson of this agency as to whether the project contributed to the economy and efficiency of the agency in the use of the resources made available to it under the Act. In subsection (7)(a), the Minister is effectively removing the very accountability which he demands in subsection (6)(b). I do not see why this is being provided in these tight terms.
I understand why a Minister would not want the agency to question whether he was providing for an MRI scanner in a hospital, which was being proposed to be funded under the agency, because it is ultimately for the Minister to decide policy on the availability of certain treatments, etc. Having made a decision about the policy, however, the question of whether the execution of the policy represents value for money and whether it is an efficient use of resources available is central to the agency. If the agency is to have the confidence of the Oireachtas, which is establishing it, and the Committee of Public Accounts, there must be a possibility of expressing opinion on the merits of a policy which it is implementing particularly if that policy is undermining the value for money requirement for which the agency is centrally responsible. If there are crazy projects coming forward to it, the agency cannot simply state it can produce a funding package for such lunacy. That is not the role of this agency.
The role of the agency must be to see that the €5 billion being made available to it by the taxpayers is used prudently and that anything it touches stands up to scrutiny. The agency will be advising the Departments on the funding package and if it has good grounds for being hostile towards a project, it will be important that such information will not be concealed.
Documents should be available. If the Comptroller and Auditor General or the Committee of Public Accounts were investigating a body, it is unthinkable that the agency would provide documents with large sections, where it expressed opinions about the inefficiency of a proposal, blacked out. There should be an exemption from this provision in matters which have a bearing on value for public money, which is the central concern of the agency.
I do not consider it appropriate that the chairman or chief executive of the NDFA should express views on Government policy when appearing before the Committee of Public Accounts. There are similar provisions to this in many other items of legislation such as the Employment Equality Act, 1998, and the Competition Act, 2002. In any event, he officials of NTMA are subject to the requirements of the Official Secrets Act. This measure is not unusual. I will provide the Deputy with a list of recent Acts of which this is part and parcel.
It does not prevent the chief executive or chairperson from commenting on the facts. He can indicate what was his advice, but he cannot question the policy. It has to do with the essence of democracy that the Minister, having been elected by the people and put into Government by the Parliament, is entitled to his views. That is a long-standing precedent.
Is the Minister not providing here that such a person would have to delete his advice?
The following Acts contain provisions which would restrict the chief executive of the body in question from questioning or expressing an opinion on the merits of Government policy: the Employment Equality Act, 1998, the Health (Eastern Regional Authority) Act, 1999, the Comhairle Act, 2000, the Human Rights Commission Act, 2000, the National Pensions Reserve Fund Act, 2000, the Vocational Education Act, 2001, the Mental Health Act, 2001, the Ordnance Survey Ireland Act, 2001, the Family Support Agency Act, 2001, the Competition Act, 2002, the Civil Defence Act, 2002, the Ombudsman for Children Act, 2002.
The wording of the provision seems to be based on two Acts. The wording of the provision seems to be based on two Acts: the Comptroller and Auditor General Act, 1993 and the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997.
The Minister is saying that, if the agency gives advice that Stadium Ireland does not represent a good use of public money and that a funding package should not be put together, such advice can be made available, but that does not stack up against the provision of the section, which provides that the agency cannot produce or send to the committee a specified document——
But it can question the merits of the objectives of such a policy in paragraph (a). Section 18(7)(b) also states, “. . . produce or send to a committee a specified document in which the Chief Executive Officer or the Chairperson questions or expresses an opinion on the merits of any such policy or such objectives.”
Essentially, the agency is advisory in nature. That is what is different about it in comparison to other agencies. Its purpose is to give advice. Therefore, its quintessential functions are advisory in nature, yet through this draconian section the Minister is preventing the chief executive officer and the chairperson from outlining their advice if it should conflict with the Government's point of view because they could reflect on the merits of its argument. The Minister says the nature of the agency is advisory, but this section is absolutely draconian.
The agency will advise on the merits of the financial package. It will not question whether it was right for the Minister or Government of the day to proceed with specific projects. It will advise on the financial package and that will be made available. The question of whether the Government or the Minister should have gone ahead with a particular project will not be open to criticism. That is normal.
If the advice to the Taoiseach is that Stadium Ireland is too expensive, that similar projects have been examined such as the financial package of Liverpool FC which was much better and more efficient and the management of the project secured better value, economy and efficiency and that he should, therefore, desist from this folly——
The agency will advise on the optimum financial package. If the Minister or Government of the day decides to go ahead with a new building of the Taj Mahal in Dunboyne, the agency will be able to state that the best way to fund the project is X, Y or Z through bonds or whatever, but it will not be able to state it is a bad idea to base it in Dunboyne near the Brutons land, that it should be built in County Kildare near the McCreevys land. It will not make such recommendations.
How can it report on the economy and efficiency of the agency and the use of public resources?
The agency will tell the Minister or the Government of the day that the best financial package is a bond issue or whatever the case may be. It will not express a view on whether the project should be based north or south of the Kildare line.
It is a realistic possibility that Stadium Ireland could be presented to the agency. If it decides that it does not represent a good use of the €5,000 million available——
No, there will not be advice with that.
But the agency must report on the economy and efficiency of the use of resources.
The agency will outline the best financial package
Section 18(6) states the chief executive officer will, when required by the Committee of Public Accounts, give evidence to the committee on the efficiency and economy of the agency in the use of the resources made available to it under the Act - €5,000 million of taxpayer's money.
The agency is not getting €5 billion in taxpayer's money. The Deputy is completely misreading the relevant section. The largest amount that can be borrowed by the NDFA is €5 billion. The agency cannot borrow that amount for one project. That is totally mischievous and surprising coming from a Jesuitical trained person——
The agency is accountable to the Committee of Public Accounts for the economy and efficiency of its use of resources. The resources being made available are up to a maximum of €5,000 million. The Minister is saying the agency cannot make a comment on how hare brained are the projects presented to it. That is ludicrous. Why include a section——
Hare brained ideas are usually referred to the people at general elections. Wild decisions are made to elect Members such as the Deputy and myself regularly and Deputy Burton occasionally.
There is a contradiction between subsections 18(6) and 18(7).
Is the amendment being pressed?
Yes as I try to recover my composure.
Amendment put and declared lost.
I move amendment No. 52:
In page 15, subsection (7)(a), line 18, after “policy” to insert “except where this is relevant to the efficient use of public money”.
Amendment put and declared lost.
Amendment No. 53 not moved.
Section 18, as amended, agreed to.
NEW SECTION.
I move amendment No. 54:
In page 15, before section 19, to insert the following new section:
19.-The Agency shall be subject to the Freedom of Information Act, 1997.".
Amendment put and declared lost.
SECTION 19.
I move amendment No. 55:
In page 15, between lines 26 and 27, to insert the following subsection:
"(2) The Agency shall make a report to the Minister not less frequently than every 3 months on its main activities during that period, and the Minister shall lay the report before each House of the Oireachtas.".
The Minister has been fond of introducing private sector and international capital market models in the public sector. The agency will command significant resources. If it was quoted on a stock exchange, the chief executive and board of directors would be required to give information on significant movements in shareholding capital or significant changes in plans or undertakings by the company. This is a standard requirement in all stock exchanges.
I seek equivalent reporting to the body that represents the shareholders in this instance. The elected representatives of Dáil Éireann, on behalf of the people, should be reported to regularly regarding the activities of the agency. The Minister's favoured organisations in the private sector which are quoted on the stock exchange do absolutely no less. We should demand similar reporting from the agency, otherwise it will essentially not be subject to ongoing reporting requirements other than to produce an annual audit that must be laid before the Houses six months after the date of the audit. Given the secrecy to which the agency is bound, this will mean much of the information will only become available a year and a half after some of the events will have occurred.
Section 19 requires the National Development Finance Agency to produce annual reports to the Minister on its activities. A statutory requirement to report every three months would place an unduly onerous burden of reporting on the NDFA. This is a matter that could be best dealt with by the issuing of ministerial guidelines under section 3(3). Therefore, I do not accept the amendment.
It is obvious Deputy Burton has not heard my views on the matters regarding public companies to which she referred when she used the analogy that such companies must issue reports and statements of earnings every three months. Two matters have contributed to Enron-type accounting. One is the requirement to report every three months which has contributed in no small way to the pressure on executives and financial officers to hype earnings. It also means companies cannot engage in any long-term planning because it will reflect on their share prices. The second factor which has contributed to Enron-type accounting is share options for executives. These place pressure on them to keep the share price high because they have a vested interest.
I am glad the Deputy has given me an opportunity to give her my views on these issues.
I will give the Minister my views.
At a meeting I attended in Washington a few months ago a leading luminary on world economics gave similar views to the assembled small audience regarding one of the contributory factors. I agree with him and have held this view for some time.
The question of reporting every three months is one area in which I do not agree with the Deputy. That is not to say, however, the NDFA should not report every so often, but as she made the analogy of public companies, she gave me the opportunity of saying those two contributory factors should be addressed. Annual reports are published by most bodies under ministerial remit which are laid before both Houses of the Oireachtas. That is adequate in this regard.
The Minister failed to mentioned that the main reason for Enron-type collapses was the use of off-balance sheet financing. The motivation in establishing the agency is for the Government to indulge in a similar form of off-balance sheet accounting.
There cannot be off-balance sheet accounting for Government.
While I share his concern about executive share options, this is the Minister who slashed the rate of capital gains tax from 40% to 20% to encourage large elements of the corporate sector to take part of their remuneration from companies in the form of share options which would be subject to capital gains rather than ordinary income tax to which people at present are subject.
We quadrupled the yield to the State each year.
If we are to engage at this late hour, just before I leave for the Labour Party Christmas party, in a discussion about the pros and cons of elements of the Minister's policies, I can do so but not at great length. His failure to require the NDFA to report on a reasonably regular basis on its principal activities is a denial of the rights of accountability to the House and the people.
The Deputy should not be concerned about the late hour because, due to my ill-spent and misspent youth, I only come alive from 11.30 p.m. on.
Amendment put and declared lost.
Section 19 agreed to.
Section 20 agreed to.
NEW SECTIONS.
I move amendment No. 56:
In page 16, before section 21, to insert the following new section:
"23.-Section 54 of the Finance Act, 1970, is amended by inserting the following after subsection (7A) (inserted by the Housing (Miscellaneous Provisions) Act, 2002):
'(7B) The Minister for Finance may engage in such transactions of a normal banking nature with the National Development Finance Agency and with other persons-
(a) in connection with the performance by the National Development Finance Agency of its borrowing function under section 6 of the National Development Finance Agency Act, 2002, and
(b) for the purposes of the better management of the indebtedness incurred by the National Development Finance Agency under section 6 of the National Development Finance Agency Act, 2002,
and may, for the purpose of those transactions, issue such funds from the Exchequer, as the Minister for Finance considers appropriate, and the expenses and other costs incurred by the Minister for Finance in connection with or arising out of those transactions shall be charged on the Central Fund or the growing produce thereof.'.".
Amendment agreed to.
I move amendment No. 57:
In page 16, before section 21, to insert the following new section:
"24.-The First Schedule to the National Treasury Management Agency Act,
1990, is amended by inserting the following after paragraph (ggg) (inserted by the Housing (Miscellaneous Provisions) Act, 2002):
'(gggg) section 54(7B) (inserted by the National Development Finance Agency Act, 2002) (in so far as the provision relates to the engagement in certain transactions of a normal banking nature) of the Finance Act, 1970,’.”.
Amendment agreed to.
Section 21 agreed to.
Amendment No. 58 not moved.
Section 22 agreed to.
Section 23 agreed to.
SCHEDULE.
Question proposed: "That the Schedule be the Schedule to the Bill".
Why have non-commercial State bodies, such as IDA Ireland, been excluded from the list?
None of the bodies concerned would be undertaking commercial activities.
They would undertake their own projects.
Does the Minister not believe they have capital projects, such as the industrial parks the IDA developed?
The Deputy is referring to the bodies entering into commercial arrangements with businesses or whatever.
Most of those comprised advance factories.
The Bill is concerned with infrastructural projects.
Advance factory projects would have been built with borrowed money.
It is my advice that section 20 provides that I can add to the list should I wish to do so.
What timescale is the Minister working to in establishing the NDFA, pending the passage of the legislation?
The Bill is being discussed in the Dáil this week and I hope it will be discussed in the Seanad next week. I hope to establish the agency early in the new year.
Does the Minister have any money for it?
What about the figure of €5 billion?
That is the aggregate amount the NDFA can borrow at any one time.
It would borrow from the existing public capital programme.
Question put and agreed to.
Title agreed to.
Bill reported with amendments.
I thank the Minister and his officials for attending and committee members who spent six hours in a straight session.
