Colm McCarthy: 'Why incoherent, arbitrary ad-hockery cannot prevail'
The very public falling out over the €3bn rural broadband plan hides a massive snub to the in-house Government experts
The decision to select the only bidder as 'preferred' for the €3bn rural broadband plan has proved controversial. Whatever the merits of the plan, one aspect makes the decision unique. The Government, faced with a clear rejection of the PwC cost-benefit study by the Department of Public Expenditure - they said it was 'not credible' and not consistent with the Government's public spending code - had three choices:
(i) Accept the department's advice and go back to the drawing board.
(ii) Accept the department's advice, acknowledge that the PwC study was 'not credible', but exercise their political prerogative to go ahead anyway; or
(iii) Reject the department's advice and rely on the PwC study as the basis for going ahead.
They chose the third option, with the Taoiseach, Tanaiste and various ministers citing the PwC study as the justification for their decision. They were in effect saying that the consultants, employed by the project champions, the Department of Communication, got it right, the benefits exceed the costs and the project passes the tests required by the public spending code. The Department of Public Expenditure just got it wrong in the opinion of the cabinet. All is well, and the public spending code is still in place. They then published the PwC study and the extensive criticisms it attracted from the department.
This naturally invites people to read these documents. The department did not get it wrong, PwC did, and the Government could have acknowledged this and still have gone ahead if they felt attracted to the project regardless. That is, they could have said OK, this project does not meet the cost-benefit tests, but we are the Government and are perfectly entitled to go against official advice.
There are plentiful precedents and it would have been perfectly legal and constitutional. But that is not the course chosen. In a very public fashion, they have relied on a consultant's report against the advice of their in-house experts, the guardians of the public spending code and the repository of the Government's expertise on these matters.
All of this is quite unprecedented. What now is the standing of the public spending code? What is the incentive for some other department, selecting consultants to evaluate a project to which the department is committed but confident that an over-generous verdict will be endorsed publicly by ministers despite technical shortcomings?
No sane department or State agency would ever again be tempted to choose consultants likely to conduct a dispassionate cost-benefit analysis, if they ever were. A plan to spend €3.5bn on public transport improvements in Cork was released during the week - if you were the project champion on this proposal, who would you engage to do the cost-benefit study? If any flaws were picked up by the eagle-eyed Department of Public Expenditure, why should you care?
The Government has not just dismissed publicly the analysis of its own officials - it has undermined the public spending code. If it had chosen to accept their verdict it would have offended PwC, but they would have survived. There would have been a political row but there is a political row anyway. Instead they have abandoned the process for project selection in the Irish public capital programme, in favour of incoherent and arbitrary ad-hockery.
A new regime was introduced last Tuesday week and works like this: the promoting department will hire consultants, who are conscious of their client's public commitment to the project, to do a cost-benefit study. The study needs to be favourable to the project and may have to torture the data into submission. The specialists at the Department of Public Expenditure will then review the study and may find it wanting. The cabinet will act as adjudicator if these people disagree and will publish the correspondence.
There is one very large snag. The cabinet simply has no competence to adjudicate, they are lay people, in place not because they are experts but because they have been elected. They are perfectly entitled to make the political choice to go against civil service advice but are not competent to pronounce that their in-house professional advisers are mistaken on some technical matter. They have never done so, or purported to do so, before.
They are also plain wrong in this instance - the PwC report is not a proper cost-benefit analysis for the reasons explained by the Department of Public Expenditure, whose economic evaluation unit is employed by the Government precisely to assess such matters.
The public relations strategy has been consistent. The question as framed by the Government's media advisers has been "wouldn't it be nice if everyone in rural Ireland had super-fast broadband?" There is only one answer to this question. Other possible questions include, say, wouldn't it be nice if everyone had a shiny new car, or free electricity? If private benefits count against public costs, as preferred by PwC, there is infinite scope for calls on the capital programme.
In addition to inspired newspaper stories questioning the motives of an identified public official, there is plentiful evidence of spinners at work. Subsequent to the decision there have been briefings to the media reminding them of the sad and sorry record of the dead-handed civil service in opposing various important initiatives 50 and more years ago. They tried to stop free secondary education, it is alleged, when Donogh O'Malley announced its introduction in 1967.
What happened was that O'Malley announced the 'free' scheme off his own bat, without getting prior approval, to which the Department of Finance naturally took exception. Anyway, the Government was already covering an estimated 80pc of the costs, mainly through paying the teachers' salaries. The dastardly mandarins also tried to stop rural electrification apparently.
They did no such thing. The Exchequer subsidy was only about 25pc of the capital cost, the rest coming from the ESB's customer revenues, and there was an annual battle over the Exchequer subsidy, as there was about everything else.
The Minister for Communications repeated in the Seanad last Thursday the assertion that the Department of Finance had opposed the introduction of free secondary education, pausing to praise generously the late Ken Whitaker, then the secretary of the Finance department. In a memo to the Government shortly after Donogh O'Malley's solo run, Whitaker did not oppose free secondary education.
He wrote instead: "The proper course would be to defer these proposals, however desirable they may be in themselves, until funds sufficient to pay for them become available at present taxation levels".
Whitaker was opposed only to the circumventing of agreed public finance procedures by ministers, as was his duty. Somebody has been misdirecting ministers and media into undermining civil service credibility, by inventing stories that never happened.
It is impossible to allocate scarce public capital intelligently without formal procedures for evaluating projects.
This Wednesday the Joint Committee on Communications will meet with officials from the Department of Public Expenditure to explore their reservations about the PwC report. It would be nice if the Taoiseach could also attend, to explain how his cabinet concluded that the PwC analysis was unblemished, and to outline what new process is to replace the abandoned public spending code.