Thursday 17 October 2019

'Build it and they will vote' doesn't really work when it comes to winning elections

Dublin airport's new terminal was built just in time for the economic crash and slump in numbers
Dublin airport's new terminal was built just in time for the economic crash and slump in numbers
Richard Curran

Richard Curran

It is quite depressing to listen to the debate this week about the location of the new National Paediatric Hospital at St James's Hospital in Dublin. The idea that we may still be about to make a €650m mistake is somewhat disconcerting.

But the idea that a planning application is only being submitted now after a task force recommended a different site over eight years ago (February 2006), is a tough reminder of how bad we are at planning and delivering major infrastructure projects. What is it about Ireland and infrastructure that we simply cannot seem to get it right?

Transport minister Paschal Donohoe is believed to favour a heavy rail link to the airport over the other five options laid out by the National Transport Authority.

I don't know which is the best option but I do know that it has been talked about for close to 15 years. Irish Rail is awaiting a green light on its proposed underground line to Dublin's Heuston Station, a plan it first unveiled in 2003 - 12 years ago.

The Government would argue that capital expenditure programmes are costly and the key thing is to spend money wisely. Nothing could be further from the truth. Our problems with capital expenditure projects are all about politics. Politicians want to be all over them.

Remember the ridiculous political stand-off at Cabinet between the PDs and Fianna Fáil over who should own and run a second terminal at Dublin Airport?

For several years, millions of air travellers endured an over-crowded airport while both parties disagreed on whether a new terminal should be owned by the private sector (the McEvaddys and Ryanair were interested), or whether it should be owned by Aer Rianta.

The new terminal was eventually completed just in time for the crash when passenger number collapsed!

Whenever the country has had lots of money, the problem with capital expenditure has been a lack of value for money.

Expenditure programmes in the past have got their timing spectacularly wrong. When it came to building roads we didn't build enough at the start of programmes and then too many at the end. In 2004 the Comptroller and Auditor General found planning headaches and building bottlenecks had caused road construction inflation to rise from a modest 2pc in 1996 to 12pc in 2000.

The National Development Plan intended spending €5.6bn on roads between 2000 and 2006. That figure rose to €16.3bn with an eventual overspend of €9.4bn. Around €1.6bn of that overrun occurred because, on some projects, no costings were done at all.

Another 20pc of the overrun was due to last minute changes to the original plans for the project.

During the economic collapse capital expenditure was hit very hard. Since 2008 capital expenditure has fallen by over 60pc. It went from 14.4pc of all government expenditure to just 6.3pc.

In a way it had to. As Public Expenditure and Reform minister Brendan Howlin put it, how could you spend money putting on a new house extension if you couldn't pay your weekly grocery bill?

The question is what to do now? Both employers' group Ibec and the minister would like to see a return to a healthy capital spend of around 4pc of GDP. Ibec would like that to be reached by 2020. The minister has yet to say when he thinks it is achievable.

Ibec argues that government should spend an extra €1bn in the budget next year for capital expenditure projects which would bring the total budget adjustment for 2016 to €2.5bn.

There is no doubt that capital spending brings about a return.

We may have overspent by billions on our road programme during the boom but the infrastructure has made a big difference to people lives and the competitiveness of the economy.

Building new transport links, or better roads, or new schools does bring about a quantitative and qualitative return. According to Ibec, our capital spend now is so low, that 90pc of the infrastructure budget is spent on maintenance of what we already have. If the Government is determined to spend some of our newly-won gains, instead of paying down the national debt, it might be better to invest the spending on infrastructure than on buying a general election with giveaways.

The problem is, you can't win votes by saying you are going to build a new road, a new train service or a new school.

You have a better chance if you say you are going to put €20 per week more into a person's hand.

Elections can be won after roads, schools and trains have been built when politicians can point to what they have put in place.

But the Government isn't there yet.

There are other problems. What would the Government build and how could we ensure it is done better?

Brendan Howlin can point to genuine reforms and improvements in this area. He has introduced multi-annual expenditure ceilings, regular reviews of spending, an updated public spending code, performance budgeting and a new government economic and evaluation service.

These reforms have definitely helped curtail overall spending in recent years but have yet to be fully tested when it comes to big capital expenditure programmes.

More capital spending is needed in the years ahead.

The population is growing and will increase to 5.1 million by 2025. The number of school children is set to increase every year over the next six years and by 2021 we will need an additional 3,500 teachers for an additional 50,000 pupils.

Much of that population growth will take place in the eastern part of the country where a bottleneck in the most basic infrastructure of all - housing - is already happening.

Back in late April the Government said it would publish a medium term capital spending plan in June. It didn't arrive. At the start of July it was expected to be published within a fortnight.

It now looks set to be published next month.

This minor delay doesn't augur well. It isn't so much about being a couple of months later than expected.

The worry is the delay suggests there is disagreement or wrangling about what is in it and what is not.

There is nothing more unsightly than the image of politicians disagreeing over multi-billion euro pet projects.

Expect some fancy headline-grabbing announcements of specific high profile projects when it is announced next month. Transport is likely to be a big focus.

The real tests of its value will be the amount to be spent in the years ahead, the criteria used to select which projects are included and the approach taken to costs and ensuring value for money.

They will be the genuine measures of whether things have really changed.

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