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Dan White: Show m€ th€ mon€y Brian

If, and that's a very big "if", all goes according to plan, the Government will spend €39bn on capital projects -- that's new roads, railways, schools, hospitals, houses etc -- over the next seven years.

While the €39bn capital spend proposed by the Government has been almost halved from the €75bn originally contained in the utterly over-the-top National Development Plan, it's still a heck of a lot of money.

According to the Government, with tender prices down by 30pc, it will be able to get more "bang for its buck". The revised capital spending plans will, so the Government assures us, "create" 270,000 jobs.

That's what they're telling us. What's the reality?

With our ridiculously complicated planning system, the lead time between announcing a major capital project and the first sod being turned can be several years.

If the Government were serious about spending big bucks on capital projects in 2011, 2012 and 2013 we should be already seeing the preparatory work, planning applications, public consultations, compulsory purchase orders, etc, being carried out now.

Pipeline

It's not happening. Talk to the Construction Industry Federation, the outfit that represents builders and contractors, and they will tell you that there is virtually no such preparatory work being carried out.

This means that, no matter what the Government says, there will be very little if any work carried out on big capital projects over the next two or three years.

This lack of a pipeline of new projects means that it will be 2014 at the earliest, before we could expect to see work start on many of the grandiose schemes proposed by the Government in its slimmed-down capital spending plans.

Which, call me a cynic if you will, is conveniently after the next general election.

Why am I not surprised? With the Government still borrowing €100m every working day, the notion that it or its successors will be able to spend an average of €6bn every year on capital projects for the next seven years is pure fantasy.

No matter how desirable some of these projects are, the brutal reality is that we won't be able to persuade the international bond markets to lend us the money. Far more likely are further deep cuts in public spending, much deeper than the €3bn which the Government is proposing for next December's Budget.

This is because with governments throughout the world, and not just our own crew of spendthrifts, borrowing money to beat the band, the world is facing the prospect of multiple sovereign debt crises as investors panic that governments won't be able to repay their debts. So far such panic has been largely confined to peripheral countries such as Greece, Portugal, Spain and Ireland.

That's going to change.

Even what were previously regarded as rock-solid countries such as the United States, France and Britain are borrowing at an unsustainable rate.

Theatre

What this means is that, at some stage over the next 12 to 18 months, the availability of money from the international bond markets is going to dry up and that, even when we can borrow, it will be at much higher interest rates.

With the Irish Government already paying 5.5pc for ten-year money, borrowing money to fund capital projects, either directly or indirectly by way of public-private partnerships, is going to become prohibitively expensive.

It is not difficult to imagine a scenario where the Irish Government has to pay 7pc or even 8pc to borrow ten-year money in the near future.

If, or more likely when, this happens, the Irish Government of the day will have to scrap most of its capital spending plans.

Am I being Machiavellian in suspecting that the Government's publication, amid much fanfare, of its capital spending plans was no more than a piece of political theatre?

I suspect that one of the first things the new Government will do upon taking office in 2011 or 2012 will be to scale back these plans even further.


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