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Dan White: Why now is the time to spend on schools, roads and hospitals

Today, the Government has announcee details of its capital spending plans for the next six years.

Although €1bn has been slashed from the capital budget for next year, the Government is still committed to spending more than €5bn of our money on new roads, hospitals and schools in 2011.

When money is tight, the natural reaction of Irish politicians is to cut capital rather than current or day-to-day spending.

While this avoids the need for politically painful spending cuts in the short-term, the long-term price in terms of infrastructural bottlenecks and lost economic growth is very high.



Temptation

To its credit, the Cowen Government seems to have successfully resisted this temptation. Instead, it has been announcing plans to spend €39.4bn on capital spending projects over the next six years.

Among the projects given the green light is the relocation of the DIT, which is currently spread over ten different locations, to the site of the former Grangegorman psychiatric hospital.

The Metro North underground railway from Dublin City Centre to Dublin Airport also gets the green light though I can't see for the life of me why the Government doesn't opt for a spur from the Dart at Baldoyle, which would deliver a link from the city centre to Dublin Airport to the city centre for a fraction of the cost and much more quickly.

Also surviving the Government's cull of capital projects is the new children's hospital at the Mater site. How this Bertie-era vanity project has survived into the current era of austerity is beyond me. It would have made far more sense to have located the new children's hospital in Tallaght. It still does.

The Government is also planning to spend more money on broadband, energy efficiency, research & development and the environment.

Not surviving the cull are the new rail links from Dublin to Navan and from Tuam to Claremorris. Whatever about the Dublin to Navan link, the Tuam to Claremorris railway, part of the so-called western corridor, won't be missed.

When the first part of this line, from Limerick to Galway, was opened with much fanfare earlier this year, it quickly emerged that the journey time of two-and-a-half hours was more than twice as long as the same trip would take by road. No loss.

However, while one might quibble with individual projects, scrapping capital spending altogether would be a disastrous decision. This is what happened in the 1980s.

While such a policy helps to balance the books in the short-term the long-term consequences can be catastrophic. When the Irish economy began to grow once again from 1993 onwards bottlenecks very quickly emerged. Fixing those bottlenecks in a booming economy cost a multiple of what it would have done if the work had been carried out a decade earlier.

Something similar is now happening with construction costs having fallen by at least 30pc from their peak levels. The Government hopes that this will allow it to build most of the projects it has promised for much less money.



Predicament

All of which goes to show how much money the contractors were making from public capital projects during the boom years.

Now that the contractors are desperate for work, the Government shouldn't hesitate to exploit their predicament.

Despite all of the money that has been spent on capital projects over the past decade, we are still playing catch-up. If we don't build these much-needed projects now when costs are low, we will spend many times more when the economy recovers.


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