independent

Monday 21 April 2014

Fionnan Sheahan: Nice idea -- but where is the money for this?

CHRISTY Moore's warning to builders not to forget your shovel hardly applies to the Government's latest stimulus package.

There'll be plenty of time before many of the projects outlined get under way.

Most disappointingly, the lack of detail of where the funding will actually emerge means there's a question mark over aspects of the package.

The coalition has been toying with launching an economic stimulus package for the past three months, going back to the start of the EU fiscal treaty referendum.

The finished product wasn't exactly worth waiting for.

Hopefully, the list of projects listed in the plan will actually all go ahead -- but it's a big if, given the lack of credibility attached to the figures and the abject lack of a timescale in which the funding might be obtained.

Mr Howlin said the bulk of the funding will come from four sources: the National Pension Reserve Fund; the European Investment Bank/ Council of Europe Bank; domestic banks; and other potential private investment sources.

Talk about vague. Aspects of the plan are so threadbare, you can see through it.

Repeatedly, the minister refused outright to go into the specifics of the figures.

Bizarrely, his own Department of Public Expenditure and Reform was able last night to confirm that €750m was coming from the state pension fund, the NPRF.

Exactly why the minister himself couldn't have said this from the start is anyone's guess.

The NPRF funding is the most solid part of the equation. Technically an independently operated fund, the Government can give it direction.

Already, the fund has been heavily raided to fund the cost of bank recapitalisation to the tune of €17bn, although UCC economist Seamus Coffey argues this figure is actually €20bn as €3bn was transferred to the Exchequer to the NPRF in 2009.

The NPRF funding provides the backbone of the new round of Public Private Partnerships (PPP) so heavily relied upon to fulfil this stimulus plan.

The state pension fund's involvement allows the funding from the European Investment Bank and private bank debt to come into the equation.

The NPRF assets are now depleted to about €5bn, as successive governments continue to seek any available resources.

The forceful movement of the fund into investment in infrastructure means it will get a return in years to come from the water and motorway schemes.

The wooliness kicks in after this point. The only committed funding from the European Investment Bank so far is €100m, so the apparent confidence of further figures emerging is unexplained.

The Government is talking about putting €850m into the plan from state asset sales.

The policy on the sale of specific assets was set out in February but is nowhere near fruition. The list of potential sales includes Bord Gais' energy business, some of ESB's generation capacity, Coillte and Aer Lingus.

The new licensing arrangements for the National Lottery is also being put in the mix.

Again, there is no indication of when these sales might take place as the Government will not want to go to a weak market where the crown jewels would not acquire a decent price.

The elephant in the corner here was the National Children's Hospital. Mr Howlin already said he intended to use some of the proceeds from the Lottery to supplement the Exchequer support for the project.

AFTER yesterday, there are now other draws on this tap of funding. No decision is expected this side of the summer break on the hospital, despite a clear understanding from the Coalition of an announcement being imminent.

The concern from yesterday is the long fingering of the project and other developments sucking up the funding intended for it. The private sector investment being referred to by Mr Howlin would appear to be a figure of up to €550m.

Given the developing stability in the economic landscape in this country, it is not unreasonable to expect the private sector would be interested in investing in worthwhile projects, but there's no evidence of the origin of any funding estimate.

Conall Mac Coille, chief economist with Davy stockbrokers, was less than enthusiastic about the detail of the announcement, pointing to the funding for the programme being "unclear".

He also said the plan would have little impact on Ireland's near-term growth prospects.

"Uncertainty over funding, and the private sector's participation in it, raise questions on implementation.

"In the context of ongoing budgetary pressures, today's announcements may merely displace other planned expenditures when examined in retrospect," he said.

Weariness emerged with the habit of previous administrations either re-announcing or failing to fulfil promises on the infrastructure front.

The Coalition would be better off putting a greater deal of preparation and detail into its proposals, rather than assuming the public will be impressed with seeing another list of local projects rolled out.

The desire to be seen to be doing something doesn't overrule the necessity for credibility.

Irish Independent

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