I welcome the opportunity to contribute to the debate on this important Bill.
The Government is harnessing the potential of public private partnerships to help deliver the conditions needed to sustain output and employment in the economy over the medium term. The economy's performance during the 1990s was remarkable. Growth, as measured in terms of GNP, has averaged over 8% per annum since 1994, employment rose by more than 50% during the same period and the rate of unemployment fell from 15% to 4%. The size of the economy has almost doubled in a relatively short period. This growth has been led by significant gains in competitiveness and extremely high levels of business profitability. Rewarding enterprise and risk-taking is a key element of Ireland's success. While the rate of growth has slowed down, the economy is set for continued strong growth well into the medium term.
It is projected that growth of approximately 5% per annum can be sustained during the next decade. This is above the 3% projected for the EU economy as a whole. As a rapidly growing entity within the euro zone, the Irish economy represents a broad range of positive investment opportunities. Public private partnerships will play a significant role in this area.
During the past two years administrative and management structures have been created to assist the development of an effective, efficient and broad infrastructure programme offering new opportunities for the development of public private partnerships in Ireland. This development rests on firm foundations. There has been a long and fruitful tradition of close co-operation between the public sector and private business in Ireland. Throughout the past decade of strong economic performance, high level co-ordinated economic and social policy priorities have been based on partnership agreements between the Government, employers and industry representatives, trade unions, farmers organisations and, more recently, the voluntary sector. These agreements have been the foundation for fiscal consolidation, the maintenance of sustainable growth in investment, rising real disposable incomes, employment growth, the reversal of emigration trends and a reduction in unemployment to an historically low rate.
The most recent agreement is the Programme for Prosperity and Fairness. In common with earlier agreements, the PPF contains clear commitments to a shared income and to fiscal and social policy objectives. The programme also reaffirms the commitment of the social partners to the PPP process. In particular, it provides for the formulation of an appropriate framework for the management and further development of the public private partnership process. Confidence in the future development of public private partnerships in Ireland is rooted in practical examples of fruitful co-operation between public authorities and private business. In the past decade, two toll roads across the River Liffey in Dublin, which were privately designed, built and financed are now operated by the private sector. The provision of decentralised Government offices and, recently, a public private partnership approach to prison building are other examples of successful projects involving elements of the PPP approach. The Government is now bringing a more structured approach to private sector involvement in the procurement of economic infrastructure priorities.
Why public private partnerships? The case for adopting a more structured approach to PPPs is clearcut. Submissions from IBEC and the CIF in the late 1990s set out a clear and compelling business case for the development of the PPP concept. These submissions were followed by a consultancy on public private partnership commissioned by the Government, and the consultants' report recommended the creation of formal structures to manage public private partnerships and the designation of a series of private projects across the various sectors. The consultants concluded that there were no substantial statutory or administrative impediments to the development of PPPs.
The economic case for public private partnerships has been strengthened by the prolonged period of exceptional growth in output in Ireland, which has continued from the mid-1990s to earlier this year. The doubling in size of economic activity in Ireland since 1993 is putting pressure on physical infrastructure, especially in public transport and on the roads. Higher standards set by EU directives and international conventions are demanding increased investment in the environmental area. Preserving our green environment requires better quality water supply, improved waste water treatment facilities, new investment in waste management infrastructure and an innovative approach to waste recovery and recycling. These needs are recognised in the current national development plan, and the role of PPP within the NDP is to provide an added impetus to the infrastructure programmes and adopt a systematic and structured approach to the involvement of the private sector.
The precise designation of public private projects will be decided as the national development plan projects are implemented. It is clear that the key criteria for selection are long-term value for money and the priority of the project at national level. Acceleration of the overall national development investment programme and early delivery of individual projects are the key objectives for the PPPs. These objectives can be obtained through the effective management of the process and the advantages of the public private partnership approach include optimal risk transfer, that is, the allocation of risks to a party best able to manage them and at least cost rather than simply loading risk onto the private partner. It also has an advantage with regard to the life cycle costing which recognises long-term cost factors in addition to the initial capital expenditure, direct payments and user charges which incentivise value for money and relate project costs to utilisation of the assets.
In the area of competition, there is another advantage because it generates more efficient and effective resource allocation and productivity. Also, private sector innovation and technological, financial and management expertise can be captured by a PPP approach to projects traditionally within the sphere of public authorities.
The Government, following acceptance of the recommendation contained in the consultancy study to which I previously referred, established a central PPP unit in the Department of Finance to lead, drive and co-ordinate the process. In order to ensure that the implementation of the projects is overseen at the highest level, the Government established a Cabinet sub-committee on infrastructural development and public private partnership. It is chaired by the Taoiseach and its membership includes the Tánaiste and Minister for Enterprise, Trade and Employment, the Minister for Finance, the Attorney General and other senior Ministers serviced by a cross-departmental team.
The genesis of the public private partnerships has been significantly different to the beginnings of the private finance initiative of the UK. The drivers in Ireland are accelerated delivery of national priority infrastructure projects, together with the attainment of value for money over the full life cycle of the asset rather than the procurement of public service assets off balance sheet. The process involves structured consultation with the key stakeholders. The Government has adopted a pilot project approach to developing the market for the PPPs. In the UK the initial projects involved NHS Trust, prisons and defence facilities while, in Ireland, the main emphasis is on toll roads, educational projects, public trans port and in the water supply, water treatment and waste management sectors. The initial PPP projects announced in 1999 included three roads and the operation of the light rail system in Dublin and projects in the environmental and educational sectors. The estimated total capital expenditure of the pilot projects is 760 million. It was intended that those projects would blaze a trail for subsequent projects. It is not a matter of waiting for these projects to be completed but to learn from them as they proceed.
The aim of the central PPP unit is to ensure the speedy development of the pilot projects to a marketable stage. At mid-2001 all of the pilot projects were on schedule with no significant delays anticipated. In the roads area there were two projects at qualification stage, the Waterford by-pass and a section of the N4 in Galway. A third project, the river crossing in Limerick, is due to reach the market again this year. A further eight PPP roads projects, to follow the three pilot projects previously launched, were announced at mid-year by the National Roads Authority. Altogether the estimated investment of the 11 roads projects is 1.3 billion, with a potential private finance input of 889 million. It shows the importance of public private partnerships. The cost of 1.3 billion to the Exchequer would be quite difficult to sustain, but the public private income coming on stream makes those projects feasible.
With the launch of the private projects by the Minister for Education and Science, public private partnerships in Ireland moved from a concept to reality. Guidelines on modern contracts and sectoral and overall levels are being developed. It is now up to the private sector to demonstrate its innovation skills to match this commitment to deliver the infrastructure priorities and to show that the public private partnership approach will provide value for money for the Exchequer and for the benefit of the country.