Finance Bill 2004: Committee Stage (Resumed).

I welcome the Minister for Finance, Deputy McCreevy, and his officials. We will resume consideration of the Finance Bill 2004. The committee is required by the Dáil to report the completion of its consideration of the Bill today. We will resume on section 85. Deputy Burton has sent apologies that she is unable to attend the meeting this morning.

Section 85 agreed to.
SECTION 86.
Question proposed: "That section 86 stand part of the Bill."

Does the Minister propose to introduce a tax consolidation Bill? The last one was passed in 1997. Trying to track one's way back for amendments, particularly Report Stage amendments, is difficult. Is there a move to have a new consolidated Bill?

We consolidated the capital acquisitions tax code in 2003 and the stamp duties code in 1999. The Act in terms of income tax and capital gains tax is the Taxes Consolidation Act 1997. The previous one was in 1967, but 30 years was too long a gap. There was a major undertaking, which took approximately three years, with the co-operation of the institutes of taxation, chartered accountants and other bodies. A format for doing it was worked out successfully. It will not be as difficult to consolidate the Acts from now on because the format and the way we lay out individual Finance Bills are designed to slot into the Taxes Consolidation Act. We will consolidate in a few years' time. It is not an imminent project, but it will not be as difficult as the Taxes Consolidation Act 1997, which was a major feat of logistical engineering. The process is simpler now. It would not be a good idea to consolidate every couple of years because that would create more confusion. However, we may do so after a certain period. It is not an imminent project, but it will be done in the future.

Question put and agreed to.
Section 87 agreed to.
SECTION 88.
Question proposed: "That section 88 stand part of the Bill."

This is a new provision in respect of carrying over capital sums from year to year and providing multiannual envelopes for capital expenditure. Perhaps the Minister could clarify how this will operate in practice. Under these new provisions, will the projects which have been approved by the Exchequer within these capital envelopes, and their initial costings, be set out for this committee to see? Will we get year-on-year envelope reports on the extent to which the projects are staying within budget or are experiencing unforeseen design changes, among other things, which have contributed, as the Minister knows, to substantial overruns in the national development plan? I know the Minister indicated in the Dáil that the cost overrun on the NDP is approximately 55%. I know that is not all attributable to redesigns as other factors also play a part. However, there is a sense that we have not got to grips with managing large-scale infrastructural projects. We are facing serious challenges to bring our infrastructure up to date. We must streamline project management, devolve more responsibility and scrutinise and monitor progress.

I hope the Minister will be able to indicate that he will introduce this multiannual envelope which I hope will bring an end to the crazy rush at the end of the financial year to spend everything because if this year's budget is not spent, next year's budget will be depressed by the same amount because all the money allocated was not spent. That has been a feature of our financial system for many years and it is damaging to the notion of good value for money. Perhaps the Minister could indicate how he intends to have these multiannual envelopes, which will bring more stability and better management opportunities to project managers, while also having better scrutiny, monitoring and reporting to the Oireachtas, which must ultimately approve these funds.

The purpose of this section is to give legal effect to the carry-over range of unspent voted capital from one year to the next under the rolling five-year multiannual capital envelope allowances budget for 2004. At present under the Exchequer and Audit Departments Act 1866 any unspent voted moneys must be surrendered at the end of the year. The provision will allow any unspent Exchequer capital allocations to be carried forward from one year to the next up to a maximum of 10% of the capital allocation by Vote.

The mechanism proposed in the section, which gives effect to this arrangement, defers or suspends the existing requirement to surrender unspent moneys under the 1866 Act and allows for the carry-over amounts to be spent in the following year on the same capital services originally approved by the Dáil, provided certain conditions are met, principally that Dáil approval is obtained in the relevant years. The Minister for Finance will initiate the process of seeking Dáil approval. The Dáil will be asked to give its approval on three separate occasions. The first will be by vote on the Appropriation Bill in the year of the carry over, the second will be by approving in the following year a ministerial order specifying the amounts by subheads and the third will be in that year in the resolutions on the Revised Estimates volume.

Departments will not be allowed to spend the amount of carry over involved until the Dáil gives its approval to the ministerial order. When the Dáil gives its approval, any expenditure by the Department on each capital service will be a first charge against the carry over amount of the subhead concerned. If the carry over amount is not spent in the year to which it is carried over, whatever amount remains unspent must be surrendered to the Central Fund.

Capital expenditure of its nature spans a number of years. Despite forward planning, its drawdown can be unpredictable. By providing for such carry-over arrangements in the legislation as proposed, we are attempting to strike a balance between giving Departments and agencies more assurance that the unspent capital moneys will be available within a reasonable limit for the same capital supply services as approved by the Dáil in the previous year, and ensuring that the Dáil retains its full discretion to approve expenditure for the supply services each year. The multiannual envelopes and the carry-over facility will give Departments and agencies more flexibility to plan and manage their capital programmes. This will help to address the difficulties associated with the timing and delivery of capital projects and inefficient end-of-year spending practices which can arise under annual budgeting.

The Deputy referred to the end of year drawdown, which has caused many difficulties over many years. This is an attempt to initiate rational business practices in Departments. Deputy Richard Bruton is correct in that Departments search their Votes and decide to get rid of money which they did not spend. That also applies to agencies and it is ridiculous. They are afraid that if they do not spend the money, the Department of Finance will reduce the allocation the following year. That applies to the money we often give the Revenue Commissioners because they indulge in the practice of buying ridiculous things in November and December in order to spend money. It seems extraordinary that in recent years a colossal amount of money has been paid out in capital in the last month of the year as if every project only sent in its bill at that time. I do not understand that. It is not good commercial practice.

I introduced the multiannual capital envelopes. I experimented with this idea under a relevant subhead with a particular line Department in the past two years and entered an agreement with it. We stuck by it through thick and thin, although the financial circumstances had changed, in order to allow it to plan. We extended the principle to the other Departments and the figures are in the 2004 Budget Statement.

Deputy Richard Bruton asked a separate question about managing the projects. It is the job of the line Department to manage the projects, as it is supposed to do, given the criteria laid down. We are revising some of the capital appraisal guidelines in the Department of Finance, but it is the job of the line Department and agencies to manage their projects in the manner in which they are supposed to do.

The Minister has missed the point of my request. The Minister said that there will be Dáil scrutiny in respect of carry overs in the Appropriation Bill which, as he knows, has become a total non-entity. Last year it was passed without debate.

There has seldom, if ever, been a debate on the Appropriation Bill. There might have been one during my time as Minister for Finance. I cannot remember a debate previous to that.

I remember them. They were used as confidence motions at the end of a Dáil session. However, there was no serious financial scrutiny of those motions. That is the key point of my concern.

That is right.

Ministerial orders and Revised Estimates volumes have not provided any type of serious vehicle for looking at the performance of cost control on capital projects. If we are moving towards the five-year envelope and the Minister is saying it is the Department's job to manage these, there must be provision for better monitoring and scrutiny by the Dáil. I do not have to remind the Minister of the extraordinary costs escalation that has occurred. The original cost of the Port tunnel, in my constituency, was put at €120 million but at the last count it is estimated to come in at €700 million. Matters have intervened, including redesigns, but I have never seen anyone ask whether the redesign meets the original criteria or why this has happened. There was a scandal concerning the Howth harbour project, which massively ran into debt, but I am not sure if there was a resolution of the Dáil calling for new procedures whereby major projects would be reported to the Dáil. In that way, projects over a certain figure would include the initial estimate, as well as changes to that estimate and the reason for them. That would give people an opportunity to see what was happening concerning major projects. When such scrutiny is made, it changes the attitude of project managers. What seems to have passed as good financial practice is a situation whereby, initially, Departments put in the lowest possible estimate in order to get it through the Department of Finance. Once they received Government approval there was an almost unstoppable momentum for the project to go ahead and it almost became a licence to add on, change and redesign the project. Projects got initial approval and once Government authority and momentum was behind them, cost control became secondary. We need to reassert some degree of cost control. The Minister should make an order in respect of all projects over a pre-determined figure, so that when Departments present their annual Estimates to the Dáil, they will be obliged to present a progress report on such projects to show how they compare to the initial estimate, why they are being redesigned and why there have been changes. The Dáil should be able to see that information so that Members can ask questions and elicit replies.

I am not referring specifically to capital projects but for well over a year the Minister has been saying he hopes to move to a situation whereby the strategic objectives of Departments would be integrated with their Estimates. In that way, we would see their objectives in one column and their spending policies in another. I am disappointed this has not happened. I have been long enough in the Oireachtas to recall that in the 1980s, the Department of Finance produced useful financial expenditure reports on activity and spending programmes. Some 20 years on, we have poorer financial reporting to the Houses of the Oireachtas than we had when the State was in parlous financial circumstances. We need to restore some of the practices that were operated in the past. Would the Minister agree with any of those points?

I do not want to become involved in a long debate about the under estimation of project costs because it is not really appropriate to the Finance Bill, except in the sense that it impinges upon the taxation that must be raised to pay for it. There are a number of stages from the time a project is initially conceived until the final payment is made. My experience is that when Departments put forward initial ideas about projects, the costs are under-estimated. They may ask some person to obtain an estimate but in order to get the idea through or moved forward it is not really a stringent appraisal of cost at that stage. When approval is received, the project goes to design stage and finally goes out to contract, at which point there is a valuation process to find out what the real cost will be. At that stage, we have committed ourselves to the project.

There is a third element where matters can get out of line. Until recently, there were price variation clauses, which contractors have included for many reasons, including good commercial ones. Therefore, the initial price may be a long way from the final price, due to these clauses. Some months ago at a conference in Dublin, I announced that we will bring forward changes in procedures regarding contracts.

Another strange element of public sector contracts is that all the consultants are paid on a percentage of the final price. Ethical standards notwithstanding, there is no incentive to keep the price down. If one receives a higher fee based on a particular price, it is a bit ridiculous. That applies to public sector contracts more than anything else. As I announced some months ago, however, we will introduce new arrangements in that regard. I do not expect that the construction industry will like many of them but, tough luck, we will have to get on with it. This set of circumstances does not apply in the private sector so we will bring forward some changes regarding fees in public sector projects.

That is not what I am asking. All those things are good and proper but I am asking that when a project, such as the Dublin Port tunnel, is approved by the Cabinet, the Dáil, which votes this money, should receive a presentation outlining the expected costs. We should have that opportunity. It would completely change the culture of initial estimates if Departments knew there would be accountability to the House regarding their Estimates.

They are available to any Deputy who tables a question to the relevant Minister.

A very close relative of mine was rightly criticised for saying that people did not ask the right questions. The Minister is now saying that if Deputies have time to table 40 questions about 40 different projects, and track them over a series of years, and then keep tabling fresh questions to get updates, they can hold the system to account.

That is not how the system should operate. The Minister is the guardian of financial reporting to the Oireachtas.

To be fair, they may not be reported widely but there has been considerable change in recent years regarding procedures in Leinster House for the improved development of the committee system. Deputies can get any Minister or official they like into these committees to query them on anything. I have been a Member of the House for many years and I know that was not the way the procedure was done some years ago. The Committee of Public Accounts carries out thorough investigations. If he so wishes, the Deputy can get the relevant Ministers and their officials to attend a committee and ask them about the cost of particular capital projects. Deputies can devise their own procedures.

Why is the Minister refusing to allow the Committee on Health and Children to discuss any project that will cost more than €100 million, or whatever figure we choose?

I do not have any objection to the Committee on Health and Children, or the Minister, doing that.

It is up to the Minister to make provision as to the sort of reporting we get. The Chairman will testify to the joke that is the Estimates debate here. People come in and make Second Stage speeches and a series of trivial questions are raised as people go though lists that are almost impenetrable. The style of presentation by the Department of Finance and other Departments in respect of their Estimates is pathetic. It does not provide any information on activity, performance indicators or anything about which one can have a serious debate. I am appealing to the Minister, as the guardian of financial reporting to the House, to place new requirements on Departments. We should at least get back to 1986 when we had decent reports coming through to the Oireachtas on which it could form some opinions on the value of expenditure on projects.

Interesting points have been raised, some of which are wider than the remit of the Finance Bill.

They are not that much wider because we are making provision for the change to multi-annual budgets. That will become a black hole unless it is matched by the sort of scrutiny I am seeking. I must take the Minister's silence as a view that he does not believe the Oireachtas is entitled to that systematic reporting, which is required. If no arrangements are made to provide such reporting, we will see, as in recent years, huge amounts of money being spent and a general belief by the public that we have not obtained value for money from the expenditure.

Is section 88 agreed to?

It could not be agreed on that basis.

Question put and declared carried.
Progress reported; Committee to sit again.