Jonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

2. To ask the Minister for Public Expenditure and Reform if additional use of public private partnerships, PPPs, in capital spending beyond the 10% cap will be ruled out in view of the lack of a systematic cost-benefit analysis; and if he will make a statement on the matter. [2405/18]

Jonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I ask the Minister to rule out the use of PPPs in capital spending beyond the 10% cap in light of the review and given the lack of cost-benefit analyses.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Public private partnerships are subject to the same robust and rigorous project appraisal process as traditionally procured projects.  In ensuring that Departments obtain the best value for money from public capital investment, PPPs, just like traditionally procured projects, are subject to the requirements contained in the public spending code.

The public spending code, PSC, is designed to ensure that the State gets the best possible value for all the resources at its disposal. The requirements of the code are based on employing good practices at all stages of the expenditure life cycle. Departments and other public service bodies need to be satisfied that the expenditure practices they employ are of an acceptable standard and that they consistently maintain these standards.  All projects over €20 million, which would include all PPPs, should be, and are, subjected to a cost-benefit analysis or cost-effectiveness analysis.

In addition, all public investment projects valued at €20 million or above must also be referred to the National Development Finance Agency, NDFA, for advice on the best way of financing the projects, which would include all PPPs.

An expert group was established last year to review our experience of using PPPs and to make recommendations on their future use.  The group's deliberations will be completed alongside the finalisation of the new ten-year national development plan, and I understand that one of the recommendations will be that cost-benefit analysis for PPPs, as for all major projects, should in future be published.

With regard to the 10% cap, the current position is that when all currently planned PPPs are operational, the cost of unitary payments is expected to peak at about €410 million per annum in 2023.  This is expected to be less than 5% of the expected Exchequer capital allocation in the year, so there is still significant headroom for additional projects within the 10% cap that was introduced in 2015.

Jonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

We will await the outcome of that review and see what its recommendations will be, but I am sure the Minister is well aware that the IMF recently commented on the use of PPPs. It recommended:

- Consider imposing restrictions on PPPs that are more likely to impose a future fiscal burden and consider "raising the bar" by requiring PPPs to achieve higher net cost savings compared to the public-sector benchmark.

[...]

- Make public the results of [those cost-benefit anaylses] of PPP projects, and the criteria used to select them.

- Conduct more ex post reviews of PPP projects, and disseminate the results; give more weight in these reviews to the economic and social impact of PPPs.

It will be interesting to see what the outcome of the review will be and whether we will get to a position where the cost-benefit analyses will actually be published. The Minister said the current projection is about 5%, and I am glad to hear that, but I am also a little concerned that he says there is that wriggle room there because, in my opinion, the long-term economic benefits of using PPPs are questionable. That is why we need these cost-benefit analyses to be published.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The answer to the Deputy's question varies by project. I believe private financing can play an important role in allowing important public projects to go ahead. The example I would give to the Deputy is the recent loan made by the European Investment Bank to allow us to move ahead with the new national children's hospital which is under construction. We have public private partnerships all over the country that, for example, have allowed primary care centres and schools to go ahead. I believe that in the future we will be able to find a way to allow the publication of cost-benefit analyses that will not impinge on commercial sensitivities but allow the State to get good value for such projects in the future. A matter with which I am dealing at present, of which I am sure the Deputy is aware, is any spillover effects that may have been caused by the difficulties concerning Carillion in the UK. Yesterday I met the National Treasury Management Agency, part of whose work is to deal with public private partnerships. We are working now to ensure that any potential difficulties here in Ireland are dealt with, particularly in respect of a number of schools that are part of public private partnerships. We want to ensure that the expectations of their pupils, their teachers and their communities are met.

Jonathan O'Brien (Cork North Central, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

It is interesting the Minister mentioned Carillion because its collapse has raised concerns. In British politics a number of commentators have commented on the use of PPPs and the contribution they have made. One politician said:

It enabled you [he was speaking to the Chancellor of the Exchequer], at least in the short term, to dress up considerable amounts of public expenditure and put them off the public sector balance sheet...We have now had enough evidence that it is not good value for money and therefore not sensible from the point of view of the taxpayer.

This was actually a Conservative politician, so there is not a left-wing-right-wing outlook to this matter. The publication of these cost-benefit analyses is important, and we need to find a way to achieve that without impinging on commercial incentives.

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Public private partnerships have served us well in delivering many projects, either more cost-effectively than we would have been able to do them in the past, or indeed projects that we would not have been able to make happen at all in the past. I believe private financing and the role of public private partnerships generally in the future will continue to be of great help to us in making important projects happen. My key point, however, is that the answer to the question whether PPPs help will vary from project to project. There are particular projects - for example, in the area of transport - for which PPPs will be really valuable and will help. I will continue to approach the matter on a case-by-case basis to ensure we get good value for the taxpayer and are able to move ahead with important projects.