DÁIL SPEECH ON PPPs

Deputy Thomas P. Broughan: The UK started its private finance initiative (PFI) programme in 1990 and the total estimated value of its public private partnerships is approximately £32 billion, whereas in Ireland so far it is €2.3 billion. Over the existence of previous Governments and the current Government, we have been used to school bundles and other proposals on housing and critical infrastructure. The reason the Government turned in that direction is precisely because of the blanket bank guarantee, the crash and the decision to totally eviscerate capital spending in this country for a decade. This was a deplorable decision and nobody involved in it really should be in the House.

If we look at the British record there has been severe criticism of the operation of public private partnerships. It has also had the experience of Carillion. One of its most distinguished economists, Martin Wolf, who writes in the Financial Times, stated:

A PFI contract creates a long-term contractual liability, just as government borrowing does. … Accounting procedures that treat these two ways of financing services differently are fraudulent. … [A] PFI must not be used simply to shift a liability off the balance sheet. That is a swindle and, as such, quite disgraceful.

He is right; basically it is a swindle. We have seen a range of economists bringing very critical study to bear on the operation of public private partnerships in this country. People such as Colm McCarthy have called the whole idea of entertaining a public private partnership without doing a cost-benefit or cost-assessment analysis before proceeding with any major project as, frankly, totally crazy, because one does not know what the discount rate would be.

In 2013, through the excellent Nevin Economic Research Institute, headed by Dr. Tom Healy, and the Economic and Social Research Institute, Dr. Eoin Reeves produced a paper entitled, “Public-Private Partnerships in Ireland: A Review of the Experience”. This highlighted grave deficiencies in public private partnerships, particularly around the awarding of contracts, governance issues and proper value for money analysis. A former Chairman of the Committee of Public Accounts has spoken in this debate on public private partnerships. In 2011, a report of the Comptroller and Auditor General made some devastating conclusions on public private partnership expenditure. He called it a sunk cost that has delivered no effective benefit and pointed out the ongoing impact on the national debt. As the Minister of State knows, our national debt at €206 billion is still significant.

There was actually a ten-year review of public private partnerships in Northern Ireland entitled, “The use of Private Finance Initiative (PFI) Public Private Partnerships (PPPs) in Northern Ireland”, which found that the bottom line on public finance is it does create an ongoing public debt. It stated the additionality of public finance is illusory and finance costs are higher for the private sector. The whole rationale in this regard, as advanced by reasonable credible economists across the board including people such as Mariana Mazzucato at the University of London, who always stresses the entrepreneurial nature of the State, is that the State, because of its interest costs and its expertise – if it mobilises it – is the best organisation to provide public infrastructure.

I am a member of the Committee on Budgetary Oversight. Recently, our excellent Parliamentary Budget Office, under director Annette Connolly, published a review of public private partnerships. One would hope there would be higher quality output, in the knowledge that the private providers would be obliged to maintain it for 20 years into the future but, at the end of the day, all it offers is moving the cost of critical infrastructure off balance sheets.

We had a long discussion about the Carillion collapse. I want to mention the treatment of workers. A number of the Deputies in the House, including my colleagues in Independents 4 Change, became aware of the phenomenon of phony employment or phony SMEs in the building industry, whereby people were forced mar dhea to work for themselves when in actual fact in every respect they were employees. They were not permitted social insurance or pension rights and they were treated very badly. That battle is ongoing. As my colleagues have concluded, the public private partnership model is badly flawed. It is something to which we should not resort now that, hopefully, with positive tax revenues coming down the line, we have the significant possibility of spending in the future. We should do it through the State and the House, and provide the infrastructure our people deserve and desperately need in health and education.