The second item on the agenda is consideration of the ministerial order, Finance Act 2004 (Section 91)(Deferred Surrender to the Central Fund) Order 2006, which on 23 February the Dáil ordered be sent to the committee for its consideration. I ask the Minister to make a brief opening statement.
Finance Act 2004 (Section 91) (Deferred Surrender to Central Fund) Order 2006.
This order is essentially a technical instrument to allow the Dáil to approve formally the expenditure in the current financial year of capital moneys carried over from the previous year. Section 91 of the Finance Act 2004 requires that the amounts of capital carried over by Vote be specified in the annual Appropriation Act of the year for which the carryover is proposed. These amounts require to be confirmed in an order made by the Minister for Finance by 31 March of the following year after approval of the order by the Dáil. Accordingly, the draft order before the committee for consideration must be made by me before 31 March to allow Departments and agencies to spend in 2006 the capital amounts specified in the order.
The total amount proposed in the draft order for 2006 is €289.3 million. The total amount provided for in the Appropriation Act 2005 was €345.7 million based on preliminary outturn figures notified by Departments and included €56.4 million for the Health Service Executive. As I indicated in my statement of 25 January to the Dáil, my Department was informed subsequent to the Appropriation Act 2005 by the Department of Health and Children which, in turn, had been advised by the Health Service Executive, that there may be some alterations to the estimated 2005 outturn and consequently the capital carryover figure of €56.4 million for the HSE included in the Appropriation Act 2005. The Department of Health and Children has indicated that the definitive position in respect of capital spending in 2005 in the HSE will not be known until the appropriation accounts for the HSE are finalised for submission to the Comptroller and Auditor General, the statutory date for which is 31 March. Accordingly, no provision for a capital carryover in 2006 for the HSE is being made in the draft order being considered by the committe.
As regards overall 2006 capital spending in the HSE, the existing allocation is €574 million. When the final outturn for overall HSE spending is available, the Tánaiste and Minister for Health and Children and I will review the capital spending requirements of the HSE in the light of the final 2005 outturn. In the event that a Supplementary Estimate is required later this year to meet the capital requirements of the HSE, one will be brought forward. The carryover amounts provided for in the Appropriation Act 2005 are otherwise provided for in the draft order. Once the order is made by me, the relevant Departments will be enabled to spend the carryover amounts.
The capital carryover facility forms an integral part of the five year rolling multi-annual capital envelopes introduced in 2004. The multi-annual system is designed to improve the efficiency and effectiveness of the management by Departments and agencies of capital programmes and projects. As a result of the carryover facility, moneys which would have been lost to the capital programmes and projects concerned under the annual system of allocating capital can now be made available for spending on programme priorities in the subsequent year. As a result, some €525 million which would otherwise have been surrendered to the Exchequer has been made available for spending in 2005 and 2006 in areas such as roads, public transport, social housing and education.
A total of €289.3 million is being carried forward from 2005 to 2006, compared to a capital carryover figure of €236.4 million in 2005. The main areas of expenditure are: a sum of €96.5 million to fund the construction, improvement and maintenance of national roads; a sum of €73 million towards local authority and social housing programmes; some €19 million to FÁS to carry out health and safety works on FÁS training centres; a sum of €6.3 million for science, technology and innovation programmes; and a sum of €18.2 million for forestry.
I commend the order to the select committee.
I have a few points to make. Obviously, the sector causing the greatest public unease is the health sector, in which, apparently, money designated for capital expenditure was used for current expenditure purposes. I am still not altogether clear as to how that was in accord with the Votes approved by the Oireachtas. If money had been voted for capital expenditure purposes, I do not know how authorisation was secured to spend it for current expenditure purposes. To judge from the chief executive's subsequent comments, the Exchequer releases were extremely erratic or strange, in that he was obliged to use current budgets to fund a number of capital projects. Subsequently, he tried to cross over the money to rebalance the books. The Minister should explain exactly what are the requirements in respect of the expenditure of money by the Health Service Executive for current and capital expenditure purposes. Does this conform with the financial management requirements he sets for all bodies?
I understand a body may carry forward 10% of unspent moneys. To clarify, is this in respect of the entire departmental envelope or does it relate to specific programmes only? In this instance, how much could not be carried forward? It is clear that projects are falling behind target. What reports are received by the Minister on the oversight of these projects? Does he receive information on whether projects fall behind schedule due to unforeseen costs or whether they continue to be robust good investments? What reports are received by him when a project falls behind and those responsible decide to continue and keep the money without conducting a new evaluation? I am anxious to be reassured that someone rides shotgun on projects that go off the rails somewhat. Implicitly they so do by not meeting spending targets.
For some years the total Exchequer spend has been considerably short of the Government's general target of 5% of gross national product. Although we have well flagged infrastructural deficits, we do not appear to have bankable projects on a sufficient scale to use the money which the Government is willing to make available. It appears there are continuing problems in project development and bringing forward bankable projects to use the available money. Has the Minister identified the source of these problems? Allied to this, it has been proposed that our reliance on public-private partnerships, PPPs, should grow. However, it appears PPPs are complex and consequently particularly slow in coming through. Given the more relaxed rules at EU level and our failure to use the full amount of available Exchequer moneys for capital projects, how important does the Minister consider the development of PPPs to be? Perhaps we should try to employ the available Exchequer moneys for good bankable projects without using PPPs. Some require tolling or other measures. In many instances, tolling is only justifiable if one is short of money to fund a project. The Government is better at borrowing than the private sector. Does the Minister know when it is appropriate to agree on matters such as PPPs and tolling because it appears we are not using the amount of money available? If the traditional funding routes could be made robust and good contracts produced, to which the Minister is moving towards, we should possibly slow down the expected reliance on PPPs until the model is better developed.
I welcome the spending of surplus moneys on roads maintenance and improvement, which is badly needed. There is also a need for acceleration in the provision of social housing as we have addressed sufficiently the demand for such housing in certain sectors of society. I welcome the provision of funding for this area. I understand that there were approximately 300,000 people on the national list for such housing last year, of whom approximately 27,000 were housed. Therefore, the additional funding is to be welcomed.
I welcome other far-seeing provisions in the Bill such as those relating to FÁS and forestry. The money is being well spent. It is wise to carry forward a certain amount of money for a rainy day.
Neither a lender nor a borrower be.
As there are always a few rainy days, I congratulate the Minister on his efforts.
This is the first year in which moneys from the Department of Health and Children fall to be considered under Government rules. Previously the rules pertaining to the health boards applied. The final issue will be clarified when the appropriation accounts — the full audited accounts — are provided for the Comptroller and Auditor General before 31 March. The Government will then receive full information. It has made the point that this will not have an impact on the capital programme for the health service. We will continue to fund projects which are required and ready to proceed. The extent to which the €56.4 million is available or has been expended will become clear when the appropriation accounts are provided before 31 March.
Did it happen in accordance with Government rules or outside them?
There are procedures in place governing the use of current funding for capital funding purposes and vice versa but the approval of the Department is required. In this case, approval would be retrospective. Until the appropriation accounts become available, I cannot be definitive and give the Deputy a straight answer on whether the figure of €56.4 million is real or anticipated. That is what the chief executive of the HSE has stated. I am aware that a bedding down process was involved in the first year of operations. We would like to see the procedures under which the HSE now operates — it has its own Vote — implemented as quickly as possible. However, we will not know what the position is until we see the appropriation accounts on 31 March. The HSE’s financial year is the same as that of other Departments — it runs from January to December — and the appropriation accounts must be provided for the Comptroller and Auditor General by 31 March. I decided to bring this matter to the attention of the House because it was correct and prudent thing to do. I stated I would not be in a position to clarify the matter until the appropriations accounts were made available to me on 31 March.
Questions have been asked about PPPs. In common with all large capital projects, the value for money achieved in an individual project is determined by a number of factors, including the quality of the procurement process. It is a matter in the first instance for the Accounting Officer of the Department or Office sponsoring the project. The fundamental aspect of the process is the setting of a budget for the project based on the cost of a reference conventional project called the public sector benchmark and comparing the bids received against this measure in a value for money comparison.
Due to the fact that PPPs are relatively new instruments for use by the Government, we have allocated figures to promote the idea in projects for which such an arrangement is suitable and where it would bring about more rapid completion or a return on the money spent. PPP provision is not suitable for every project. Members of the committee are aware of the controversy surrounding the comments made in the report of the Comptroller and Auditor General on pilot projects in schools. It is not simply an accountancy procedure; it is also a question of recognising that schools came on stream far quicker than they would have using the traditional procurement method. When one compared costs during the period, it was found that the spec was good in the pilot projects. The spec was such that it probably contributed to its success. Whether one would be able to provide for the same spec in every PPP-sponsored school project is a matter for continuing consideration.
The Government has indicated that a further group of schools will be procured using the PPP method. We have asked the National Development Finance Agency to act as procurement agency in an effort to streamline the process and the means by which these projects can be delivered. It does not and will not compete with the Exchequer-funded mechanism in terms of volume but does provide an alternative mechanism by which we might be able to continue to benchmark the relative efficiency or effectiveness of what we are doing with either stream of expenditure. There are good examples of where such a project works, for example, in the regeneration of housing and apartment blocks undertaken by Dublin City Council. Members may be more acquainted with some of these successful projects than I am. Other successful examples include major water schemes. There are many types of PPP such as design-finance-operate and finance-operate-transfer models. The same model does not always work in every area of service provision.
A question was raised about whether the Department was able to expend moneys within any given year. We must continually look to the benefits of the multi-annual capital programme system. There has undoubtedly been an improved level of expertise and competence. Certain projects undertaken in the past would clearly be carried out more successfully were they to be undertaken today. The performance of agencies such as the National Roads Authority is very good. When one allies this with the efforts made by the Government in introducing new construction contracts, one can see that real efforts and significant changes are being made. The new construction contracts were introduced to overcome the traditional problem of add-ons that emerged in contract management and led to outturn costs being greater than initial project or tender costs. These significant changes are necessary, given the level of current expenditure on behalf of the taxpayer and the developments which have taken place in the private sector in the delivery of such projects in recent years. The taxpayer is entitled to have access to such funding mechanisms in an effort to ensure value for money is achieved.
As someone who formerly had ministerial responsibilities, the Deputy is aware that there were times when there were delays, whether in design, land procurement or the tender process. EU procurement mechanisms are such that there are very onerous responsibilities in ensuring tenders are properly examined and decided upon to avoid subsequent judicial review or litigation which would not only delay projects but also add litigation costs.
One cannot get it right in every respect but there is ongoing significant improvement, as one would expect, given the level of expertise acquired in delivering projects. Unfortunately, successive Governments did not have the same prospects of resources being available to embark on the ambitious projects for which we are providing and in respect of which we can have a ten-year perspective, given the increasing role public transport will play. The Minister for Transport is putting a lot of time and effort into the team he has brought together in order to have world class individuals involved in the management of the major public transport projects envisaged for this city, particularly the metro system, to ensure we achieve outcomes consistent with the most effective use of taxpayer's money.
On the €9.5 million for Campus Stadium Ireland included in the multi-annual capital investment framework, what will this involve or will the Minister send me a note on the matter?
Individual Departments have the details. From memory, this involves the next planned phase of development at Abbotstown to provide academy facilities. The notion is that there would be facilities on campus to meet the requirements of sports bodies, particularly elite and professional sportspersons. The Football Association of Ireland expects to use such facilities. The Minister for Arts, Sports and Tourism, Deputy O'Donoghue, would be able to give the Deputy more details.
Why is the rollover of €38 million in relation to local authority and social housing programmes so large, given that the building industry is so active?
It is envisaged that 23,000 social housing units will be built under the social housing programmes between 2006 and 2008. It is in the nature of the five-year multi-annual capital programme that, rather than expending money in the year in which it is provided, we are able to ensure the design and preparation of schemes are not compromised by the surrender of such moneys to the Exchequer, which would have been the case prior to the former Minister for Finance, Mr. McCreevy, making these very important changes. Through the various affordable housing schemes, it is envisaged that in excess of 15,000 homes will be delivered in the period 2006 to 2008. Between social housing units and affordable housing schemes, it is anticipated that a total of 38,000 homes will be built as a result of the allocated expenditure in those financial years. In the past ten years 43,000 local authority houses have been built and 18,500 sold under tenant purchase schemes. As such, it is envisaged that there will be a significant acceleration of the provision of units between 2006 and 2008 under these headings.
I thank the Minister and his officials for their attendance. It is proposed to consider the Revised Estimates for the Office of Public Works and, if possible, the Department of the Taoiseach on Wednesday, 29 March. Is that agreed? While it has been agreed to hold the disucssion on the OPW, we have not received confirmation that the Taoiseach will be available on that date. The Joint Committee on Finance and the Public Service will meet on Wednesday, 15 March.