Vol. 573 No. 5
9 Mr. McGinley asked the Minister for Finance if he has satisfied himself with the level of public transparency for the system proposed for deciding whether to avail of public private partnerships in respect of spending projects or programmes. [25857/03]
I am satisfied with the transparency of the arrangements in place for public private partnership projects. As I said in a reply on 30 September 2003 to a similar question in this House, overall value for money in privately financed projects is assessed by comparing Exchequer cash flows under a more traditional procurement with the cash flows arising in the privately financed PPP tender. The private financing is an integral part of this assessment but one which is so significant it merits separate consideration. I established the National Development Finance Agency for this purpose. One of its functions is to advise on the optimal means of financing public investment projects. The NDFA brings financial expertise to this role and I have provided it with the necessary flexibility to carry out its functions and apply its professional judgment.
A State authority can contract with the private sector to build a facility while financing this itself at the cost of Government funds – currently about 4.3% for long-term money. That is the general test applied to the financing element of any alternative package. Alternatively, a State authority can seek an all-in package from the private sector which would include the design, construction and maintenance package and also a financing mechanism. In assessing whether such a package is good value for money many issues arise, including the comparative cost of funds, the degree of risk transfer, quality of product, maintenance quality and so on.
I intend that any additional cost associated with private finance will only be incurred where the overall value for money assessment warrants it. The NDFA will assess all proposed private financing packages on a case-by-case basis. Where non-Exchequer funding is to be used and in the opinion of the authority the overall cost of the private financing package is excessive, taking into account risk transfer factors, it may offer NDFA financing in its place. It will be a matter for the relevant State authority directly concerned with a project to decide which package to accept after reflecting on NDFA advice. All PPP projects are subject to the normal rules of accountability and scrutiny, including audit by the Office of the Comptroller and Auditor General and accountability to this House via the Committee of Public Accounts and other relevant Dáil and joint Oireachtas committees.
The Minister will probably not agree with me that virtually 99% of defects in the management of public projects have fallen not on the funding side but in the areas of cost evaluation, project management and so on. Funding has not been a big problem. The reason I tabled this question, however, was the most unsatisfactory meeting with officials from the Department of Finance at the Joint Committee on Finance and the Public Service, during which it transpired that under no circumstances would any other comparator be made available to interested persons in the Oireachtas. There would be no opportunity for us to see whether, as the Minister says, the funding element of the package was competitive with the public borrowing alternative. How can the Minister say this will be perfectly transparent when officials of his Department have told the committee they will not reveal this part of the process? They offered very spurious grounds of confidentiality suggesting that open analysis would undermine the chance of the public getting good value and that it was much better to have secrecy to secure good value.
The history of secrecy versus open analysis yielding good value to the taxpayer is a sorry one and we do not have to look far to see that is the case. Will the Minister not think again about the transparency and the obligation of the National Development Finance Agency and sponsors to produce some public indication, albeit aggregate, of the comparison that was made and how the two stack up against one another?
The Deputy is asking the reason the public sector benchmark is confidential. It is my intention that it will remain confidential for a number of obvious reasons. There would be pressure to disclose the expected price to bidders and if I did so it would be a nonsense. I intend to keep it confidential for the following reasons: it incentivises competition; it is a key factor in encouraging innovation; it safeguards commercially sensitive information; it enables bidders to use professional expertise in identifying best approaches to delivering outputs; it encourages an approach to service delivery that spans traditional boundaries; it incentivises different improved design and service solutions to those contained in the public sector benchmark; it incentivises flexibility; and it focuses suppliers on re-engineering business to reduce costs.
I point out that these arrangements in no way—
That is not the question I asked. Perhaps I will clarify it to save the time of the House.
The Deputy asked why it should remain confidential and I am telling him the reason it will remain so.
I am talking about information that would be made available on an aggregate basis that would prove to Members of this House and interested members of the public that we were getting good value for money.
I have no objection to doing something in the aggregate that would not give away the details of the public service benchmark because if we are going to assess projects and all the bidders know what they have to bid against, we would be in trouble.
That is not what I am looking for.
If the Deputy can come up with a more suitable way of getting what he wants in a general manner I would have no particular objection but we are not going down the road of making this benchmark—
Will the Minister ask his officials to work on such a model? The Minister has more resources available to him than I do.
Perhaps the Deputy will give us some of his ideas and we will work on those as well.
The presentation made by the Minister's officials to the Joint Committee on Finance and the Public Service included a flow chart with something like 20 steps that they have now included in their version of public private partnership. Looking at it – I am sure the Minister agrees as a fellow accountant – one can see that it will cost a fortune in terms of the services of accountants and legal advisers for the bidders. This is one of the reasons PPPs will be so horrendously expensive for the public purse. We are entitled to know why a PPP is considered more attractive in net terms. The Minister has told us the general reasons but the State can borrow 4.5%. Mr. Somers, who has an excellent record in financial management, has said there is no reason items such as schools and financial institutions should be built by PPP yet the Minister has decided, in the form of PPP he is opting for, to keep the full comparative costs hidden from the Dáil. Will the Minister have a change of heart and make the full comparative information available to the Dáil?
The Deputy appears to be deliberately confusing two particular principles. It is not only Dr. Somers who stated that. I have said on many occasions in this House over a long period of years, and I repeat it now, that the State will always be in a position to borrow funds at a lower rate than any institution. That has been, is and will remain the position but the reasons for going down the PPP route in this country and other countries do not solely relate to the cost of funds. In the United Kingdom they can borrow at a very attractive rate—
Look at the disasters that occurred there.
—but they too have gone down the route of the PPP fund. I am not sure whether the Deputy is in favour or against public private partnerships. In some of her utterances she is clearly against PPPs but in others she appears to be in favour of them.
We want them.
A few minutes ago she said the low take-up of PPPs is bad news. I say to Deputy Bruton and others that the effectiveness of this benchmark has been so good that on the Kilcock-Kinnegad bypass it has proved extremely difficult for the winning tenderers to be able to source the funding at such a low cost. They definitely did their job when we allocated that project in that area, as the Deputy knows well, and some people are very sore about it.
