Money 'available' for infrastructure projects
"The problems we have with infrastructure here do not relate to a lack of finance," chairman of the National Pensions Reserve Fund Commission (NPRFC) Donal Geaney, told the committee.
The NPRFC says it is willing to invest up to €200 million in public-private partnerships (PPPs), but suitable projects have been "slow to materialise".
As a result, none of the money has yet been put to use for that purpose.
PPPs are where the Government combines with the private sector to deliver a project. Typically, a private consortium will finance, build and manage the infrastructure for a set period, usually between 25 and 30 years.
The Government pays a set fee each year for the duration of the contract, with ownership reverting to the State when it ends.
The attraction for the State is in not having to find the entire finances for the project. The attraction for the private sector is that the total fees received from the State usually outstrip its investment, thus generating significant profit.
The NPRFC wants to invest in PPPs because they offer the potential of healthy returns for the pensions reserve fund. The Government established the fund in 2001 to meet the future costs of social welfare and public service pensions from 2025 onwards.
The NPRFC manages the fund, taking the 1% of GNP put into it each year and attempting to invest that money wisely to increase the value of the fund.
Mr Geaney told the Public Accounts Committee that the NPRFC was committed to investing in PPPs on an opportunistic basis.
"While suitable projects have been slow to materialise, progress has been made recently with the fund joining a consortium tendering for the M50 motorway upgrade," he added.
"However, in future, rather than joining particular consortia in tendering for projects, we will make equity and/or debt finance available to the winning bidder provided we are satisfied with the prospective rates of return."
The issue of the NPRFC being involved in tendering for projects is controversial The NPRFC is an arm of the National Treasury Management Agency, the body tasked with managing the national debt.
Another arm of that body is the National Development Finance Agency (NDFA), which advises the State on the most cost-effective ways to finance public projects.
Even though both arms are independent of the other, critics have argued there is a conflict of interest when the NPRFC gets involved in PPP tenders, as it is seeking to maximise returns on its investment, while the NDFA is attempting to maximise value for money to the Exchequer.
AN Post faces the prospect of losing €8 million of funding a year it desperately needs. The National Treasury Management Agency (NTMA), the body tasked with managing the national debt, wants to cut by a third the fees it pays An Post to administer the Post Office Savings Bank (POSB).
The PSOB consists of savings accounts held with An Post, and monies in the fund are lent to the Exchequer under State guarantee.
An Post manages the PSOB on behalf of the NTMA, and receives approximately €25m a year for doing so.
But the NTMA believes the true cost of managing the fund is only about €10m. NTMA chief executive Dr Michael Somers told the Dail Public Accounts Committee yesterday it wanted to cut the fees by a third, or roughly €8m. "We decided we wanted to claw back some of (the money)," he said.
Unsurprisingly, the NTMA found An Post reluctant to agree to this when it wrote to the organisation outlining the proposal.
An Post lost €43m in 2003, and is in the middle of a restructuring plan aimed at turning around the company's fortunes.
Chief executive Donal Curtin recently told the Oireachtas Joint Committee on Communications, Marine and Natural Resources that the company was now breaking even, but stressed that finances remained extremely sensitive.
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