Seanad Éireann díospóireacht -
Thursday, 14 Feb 2002

Vol. 169 No. 5

State Authorities (Public Private Partnership Arrangements) Bill, 2001: Committee and Remaining Stages.

Sections 1 and 2 agreed to.

SECTION 3.

Question proposed: "That section 3 stand part of the Bill."

Mr. J. Doyle

I looked at the debate at Committee and Report Stages in the other House and felt it was a very good debate in which a number of amendments were accepted. It would be wrong to regurgitate some of the amendments in this House. However, there are questions I want to ask the Minister.

The Minister was kind enough to inform us last week when the Bill was before the House that there were major changes made to it. One of the changes in this section relates to subsection (1)(b). The original provision was to "arrange or to provide for a payment to a partner". However, the Minister then introduced an amendment in the other House making it subject to subsection (4), which relates to the Department of Finance. It would appear that the heavy hand of the Department of Finance will fall on every public private partnership.

Most of the PPPs will come from the Department of the Environment and Local Government. My understanding is that if it grants approval the proposal then must go on to the Department of Finance. This is a retrograde step in such progressive legislation. I understand, and it is quite right, that the Department of Finance must have some control, but look at the experience of local authorities. Everything a local authority does has to be approved by the Department of Finance and the consequent delays are extraordinary. Now we are going back to the same system with the PPPs whereby they will all be passed on to the Department of Finance for its final approval.

A better way would be for some finances to be given to different Departments, have them capped and allow them to generate their own PPPs under that capping system. I do not think this is what is being provided. The Minister might enlighten me as to whether I am correct.

Minister of State at the Department of Finance (Mr. Cullen)

I take the Senator's point. Indeed we had some lengthy discussion on this on Committee Stage. The Department of Finance obviously has to havea knowledge of what is happening in terms of the Exchequer's overall commitments. It would be folly in the extreme if Departments were operating without any notification to the Department of Finance and were committing the State to huge expenditure that simply could not be met in the coming year. The provision is not just to do with the commitment in the year a project is started but to ensure that there would be a knowledge of the flow of capital that will be required.

It is not the heavy hand of the Department. From an early stage, the Department of Finance will be aware of the nature of a project and of the general ball park commitments. There is not a possibility of a substantial project progressing to the very end after all negotiations, tender processes, consultations and so on and then suddenly being vetoed by the Department of Finance. I accept the Senator's point that if that were the case, it would be very damaging to the PPP process. It would be unworkable and would lack con fidence, particularly from the private sector in coming in.

The Department of Finance needs to know what exactly is happening, as it does in a general sense with any proposal from any mainline Department. This is simply to ensure that there is knowledge within the Exchequer on the broad outline of the commitments the various Departments are entering into. It is certainly not designed, and I want to emphasise this, so that the Department of Finance would be some sort of breaker on projects, or indeed so that it could fully integrate itself into each specific project and have a view as to what the Department of the Environment and Local Government, the Department of Education and Science or the Department of Health and Children were going to do. It is a broad-based position so that the Exchequer knows what commitments will be required in the years ahead. I am sure the Senator will accept that is important to ensure maximum efficiency, continuity and delivery of all these projects.

Mr. J. Doyle

I thank the Minister for that clarification. Last Tuesday, when we debated Second Stage of the Bill, my colleague, Senator Burke, raised a number of issues concerning a new sewage treatment works in Castlebar. The building and operation of the treatment works was designed for a period of 20 years. The company involved in this public private partnership will, seemingly, bill the local authority for the running costs of this plant. As I understand it, the council will have to accept these costs and levy them on businesses in Castlebar. This will result in an increase in rates and, therefore, businesses in some towns in County Mayo will be paying higher rates than others. The operating costs of the treatment works will have to be borne by Castlebar for 20 years, but how will that be financed?

Senator Burke claims that it will be charged to the local authority which, in turn, will have to levy that cost from the small base of commercial ratepayers in Castlebar. Senator Burke also claims that there is no role model for such a project. When he raised the matter on Second Stage, the Minster said he did not have the necessary details to reply. I hope the Minister will be able to enlighten me now.

Mr. Cullen

I dealt with this matter the other day, although obviously I do not have to hand the individual details of any particular project. Rates are a matter for the local authority which looks to its own funding base in striking a rate. In so doing, any local authority has to be aware of the capacity of the local market to pay whatever fixed charge may be placed on it. The Senator made an incorrect point in claiming that somebody comes up with a price, fixes a charge and the local authority has to accept it. That certainly is not the case and it would not be good practice. I can give the Senator specific assurances about that matter.

The Minister for the Environment and Local Government has adopted a framework for PPPs in environmental services, prepared by the consultants, PricewaterhouseCoopers. This is available on the Department's website if the Senator wishes to consult it. I am sure the local authority has done so. The detailed procedures for the kind of project mentioned by the Senator are dealt with in the framework.

With regard to Castlebar, or anywhere else, a framework will be set down. The Senator is right that every project will be different, to a degree. They may be projects to design, build and operate, they may be just design and build projects, or only operating ones. The proportion of the PPP risk that will be transferred to the private sector could be in any one, or a combination, of these areas. Each project will dictate that. Much of it will be designed on the basis of what the throughput or funding base might be in terms of contribution to a project.

For example, there are enormous volumes of traffic on the East Link and West Link toll roads, so there is a certain toll figure the market can bear and one can be relatively confident in predicting what amount will come through. There are other areas of the country where traffic volumes are not as high, so the private sector contribution could be much lower and the State contribution much higher. One would end up, however, with a toll figure akin to a higher throughput level of traffic. In other words, even though there is a lower level of traffic going through, it does not mean that everyone will pay €10 instead of €1.50. That will be balanced out in the way the PPP is structured to ensure fairness, logic and success.

Public private partnerships will not take over all traditional methods of procurement. There must be a basis for it to work in the first place. Even without a PPP, the Exchequer will have to pay for it.

Mr. Bonner

That is right.

Mr. Cullen

It will have to be paid for anyway. If no PPP is involved in a local authority project, the State will be involved through the Exchequer. There will be increased running costs in local authorities around the country for various elements of service delivery. The "polluter pays" principle is the essential bedrock of much of this legislation, which reflects the attitude of the Government, the European Commission and the European Union. It is a question of striking a balance. I am glad that the local authority will have a definitive role in that matter because it is the statutory authority when it comes to striking the rate.

Mr. J. Doyle

The only difficulty is that if Castlebar received a grant from the Department of the Environment and Local Government to build a sewage treatment plant, it would be absorbed into the costs of the local authority. In this case, however, the design, building and particularly the running costs will be left to Castlebar's commercial sector. For that reason it would appear that particular areas of Mayo will have to pay for that treatment facility.

Mr. Cullen

No, it is not quite the way the Senator puts it. Value for money is the principle underlying anything we do and it will be very much to the forefront of the decision taken on any PPP project. From the Exchequer's point of view, there has to be value for money in the equation. If, however, the Exchequer did not undertake a PPP project and instead put in the facilities the Senator mentioned, that still would not mean that the local authority would build into its rates whatever decision it comes to as to how the facility is to be paid for. Already in local authorities throughout the country the commercial sector pays for the disposal of waste. This is an addition to the quality of the facilities that will now be put in place. This benefits all citizens because we all want better water quality, to use just one example.

Mr. J. Doyle

I thank the Minister. Senator Burke also asked me to raise another issue. How are PPP projects selected? Who decides that a particular project is ideal for a PPP? Does the local authority procure the project, or is it the Department of the Environment and Local Government? I think I know the answer but the Minister might put it on the record.

Mr. Cullen

As the Senator knows, the Government decided, quite rightly, to start the PPP process with pilot schemes. This is because it is a learning process and we may not have it 100% right in the first instance. The Government's plan was to roll out a number of projects and this process is now gathering momentum. The Government is open to innovative ideas that may come forward from the private sector or, indeed, from local authorities as to what might constitute a PPP. When each project is examined, it will either stand or fall based on the value for money criteria. There is no limiting factor on what may arise in the years ahead.

Question put and agreed to.

Sections 4 to 9, inclusive, agreed to.

SCHEDULE.

Question proposed: "That the Schedule be the Schedule to the Bill."

Mr. J. Doyle

On Second Stage the Minister indicated that other agencies could be added to the Schedule at a future date. Will he indicate what other agencies he has in mind?

Mr. Cullen

This matter arose from concerns that other bodies might need to be added to the Schedule. Given the way the Schedule has been established, however, it is currently as broad as we could imagine. New State bodies may be established that may not be covered by the current Schedule, so we have provided for that eventuality. We are being careful in terms of what may happen in future. As it stands it covers almost everything that we could possibly think of at this stage.

Question put and agreed to.

Title agreed to.

Bill reported without amendment, received for final consideration and passed.