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
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.
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.