Monday 26 September 2016

A case of tunnel vision for Metro North's rail plan

The Government should abide by its own rules when it comes to costly capital expenditure, writes Colm McCarthy

Published 04/10/2015 | 02:30

CAPITAL SPENDING: Minister for Transport Paschal Donohoe at the launch of the Road Safety week, has indicated his support for the €2.4bn Metro project but there’s no sign of any funding coming down the line
CAPITAL SPENDING: Minister for Transport Paschal Donohoe at the launch of the Road Safety week, has indicated his support for the €2.4bn Metro project but there’s no sign of any funding coming down the line

During the bubble, State expenditure rose dramatically, and under virtually all headings. A major beneficiary was the State capital programme, and it became a major casualty when government revenue collapsed in 2008. This is a familiar pattern. When the public finances last got into trouble in the late 1980s, the correction saw a much bigger cut in capital than in current spending and public investment has again been cut severely this time round.

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From over €10bn in the final bubble years, capital spending by the Exchequer was cut back to below €4bn in the last few budgets. Some of this reduction would have happened anyway (there is no need to build the motorways again), but some of the cuts reflected the political attractions of deferring capital spending, as against current reductions. Capital spending also seemed less urgent given the economic slowdown and consequent diminished pressure on infrastructure.

The return of economic expansion has inevitably fuelled calls for an expanded capital programme: the public finances, although still in deficit, are no longer in full crisis mode and pressures are beginning to emerge in housing and transport. The Government's public investment plan released during the week will see steady growth in Exchequer capital spending in the years up to 2021 when it is scheduled to reach €5.4bn, roughly 50pc ahead of the likely 2014 out-turn. That this large increase will leave the 2021 figure way below the numbers at the end of the bubble is testament to the unreality of the latter.

A major portion of the Exchequer spend will be in transport, with a focus on the uncompleted sections of the national road network, where several key projects were deferred post the bubble. The list, surprisingly, does not appear to include the M20 Cork-Limerick route, but several major schemes elsewhere in the country have been restored.

The biggest single item planned in the transport sector, to commence in 2021, is a whopping €2.4bn for a metro line from Dublin city centre to the airport and Swords. At roughly €145m per kilometre, this will be one of the costliest light-rail projects ever constructed anywhere. The cost-inducing feature is that much of it will be underground. Journey time to the airport from O'Connell Street will be 19 minutes. According to the AA, the car trip currently takes 17 and the bus from Busarus has a scheduled journey time of 20 minutes. From central Dublin the new metro is promised to get you to Swords in 31 minutes, a trip currently taking no more than 20 according to the AA. Whatever the benefits of the proposed line, it is not clear that, even with ongoing traffic volume growth, speed is going to be one of them.

Nor is it the case that Dublin city-centre is the dominant origin or destination for users of Dublin airport, who travel from and to all corners of the island. As well as being the biggest airport, Dublin also has the busiest bus station in the country. And it is not Busarus, it is Dublin Airport. Swords, the ultimate destination for Metro North, is an important suburb and has grown rapidly. But there are numerous others of equal importance which will not be having this kind of money spent on them.

Dublin already has a tunnel from the city centre to the airport. It is called the Dublin Port Tunnel and it cost the best part of a €1bn. It has healthy traffic volumes, despite the toll, but is rarely if ever congested. It has adequate capacity to cater for greatly expanded bus services to the airport and indeed to Swords. There may be a case for Metro North but the alternative is available, cheaper and just as quick. That alternative is a continuing reliance on bus-based public transport using a tunnel already built and paid for.

Interestingly this was the option initially favoured by the National Transport Authority in its preliminary review of the options. They indicated that they saw merit in a BRT (Bus Rapid Transit) system for the north side of Dublin, exploiting the Port Tunnel and other existing road network. This would have cost a lot less than the underground metro, and could have been done sooner. But they chose to go out to public consultation on the options and received a long list of pleas for a rail-based solution from local authorities, rail lobbyists and others.

Minister for Transport Paschal Donohoe has indicated his support for the €2.4bn metro scheme and it has been adopted as government policy (albeit with a six-year fuse) in the capital plan.

Subsequent to the financial, collapse the Irish Government, through the new Department of Public Expenditure, launched a Public Spending Code, which requires that thorough studies of costs and benefits be undertaken for all capital projects costing €20m or more.

The idea, hardly revolutionary, behind this procedure is that the Government should make sure to have its sums done before any commitments are entered into. That such a formal code was felt to be needed is an admission that Irish public agencies are capable of extreme carelessness in the allocation of capital monies. But there is no indication that a cost/benefit analysis has been undertaken for this €2.4bn project: a public consultation has been followed, without pausing for breath, by a government commitment to spend the money, with no intervening consideration, at least not in public, of the economic rationale for this very large public capital project.

Metro North, if it goes ahead, will be just about the largest public investment ever undertaken in Ireland. It has been announced, with great fanfare, as a firm commitment of the Government, in an apparent breach of the same Government's published procedures for evaluating investment schemes financed with public funds.

There is not much point having a public finance crisis whose legacy includes the restoration of all the bad habits that created the crisis in the first place. What is the point in establishing a government ministry called the Department of Public Expenditure and Reform, its full title, if the 'Reform' bit is just for show?

The Public Spending Code published by the new department on its website is a model of common sense. It outlines, step by step, the procedures required in evaluating high-cost spending proposals. It now appears that this procedure has been suspended in the case of the largest single project ever included in the public capital programme.

Figures released last week include strong numbers for tax receipts and upward revisions of forecasts for economic expansion this year and next. The Irish economy is going through a quite extraordinary period of favourable external developments: the euro exchange rate has fallen sharply, oil prices have halved and government borrowing costs are lower than they have ever been. The economy is expanding rapidly as a result and the public finances are looking better. But the country is still saddled with heavy external debts and these favourable external factors could reverse at any time.

It would be timely if the Government would now commit to the practice as well as the rhetoric of prudence in financial management.

Sunday Independent

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