Check Against Delivery
Ladies and Gentlemen, I am very pleased to be here today to speak to you about the Government’s priorities for capital infrastructure investment over the coming period.
There is undoubtedly a strong level of demand at present for infrastructure investment across many areas and the Government recognises this.
At the same time it should be recognised that the country is in a far better position to meet these demands compared to just a short number of years ago following the economic crash.
Unemployment is below 8 per cent.
We are close to balancing our books.
The national debt is falling.
The construction industry is helping to rebuild our economy and society by providing the infrastructure it needs to meet its full potential.
For that reason, it is essential that growth in the construction sector is sustainable.
This Government is determined to ensure that the investment made in our social, economic, environmental and knowledge infrastructure is both affordable and appropriate.
We will not return to Celtic Tiger era ‘boom boost’ policies which were detrimental for both the industry and more importantly the country as a whole.
So I will begin by looking at the positive position we are in today and the infrastructure construction which is already underway, before outlining the major infrastructure construction projects which are due to commence in the coming years.
I will speak about the choices to be made on how we fund our infrastructure and more importantly how we can achieve the maximum returns on that investment.
And I will then outline how the Government is working with the construction industry to deliver the Government’s priorities, before concluding with some remarks on planning for the future.
THE CAPITAL PLAN UNDERWAY
It is clear that Ireland’s economy is in a period of strong growth and this is reflected in the Governments plans to increase expenditure in 2017 by close to €2 billion, meaning total spending will rise to approximately €58 billion next year.
Roughly €4.4bn of next year’s budget will be committed to capital expenditure.
The Government’s Capital Plan, published in 2015, set out a six year framework for infrastructural investment in Ireland out to 2021.
Total State-backed investment under the Plan amounted to €42 billion over the period.
This has been allocated across a number of sectors including transport, education, enterprise and innovation, housing, health, environment and many others.
I am pleased to say that construction has already commenced on a number of projects.
For example, the Luas Cross City here in Dublin, is ahead of schedule and due to be completed next year.
Another major project, the new Children’s Hospital, has received planning permission and the first phase of its construction has commenced.
Construction on roads such as the N17/N18 and M11 are underway.
The delivery of 14 Primary Care Centres through Public Private Partnership has also just commenced.
Building on this, and which I have been keen to highlight in recent times, the Programme for a Partnership Government clearly states that the existing capital plan is only the starting point for increased investment in priority areas into the future.
The Programme committed to additional capital investment of €4 billion over the period of the Plan. This was further increased to over €5 billion in the Summer Economic Statement.
The areas which this funding will be allocated to include housing, transport, broadband, health, education and flood defences. The final decisions on the allocations will be informed by the mid-term review of the Capital Plan, which I am bringing forward to the earlier part of 2017.
As I am sure my colleague, Minister Coveney, will expand upon in his address, due to the obvious need for additional investment in housing, the Government has already agreed that €2.2 billion of the additional capital should be allocated to the Government’s initiatives aimed at tackling the housing crisis, as detailed in the Action Plan on Housing and Homelessness – Rebuilding Ireland.
CONSTRUCTION ON THE HORIZON
As is often pointed out, the allocations of capital expenditure in the Plan increase with each year as the Government finances are projected to improve. The result is that there are a significant number of major projects due to commence over the coming years.
In the transport sector, projects which will begin in the coming years include;
– the N4 Collooney to Castlebaldwin in Sligo,
– the A5/A6 to Derry,
– the Dunkettle Interchange in Cork and
– the Metro North in Dublin.
In health, we are going to build a new National Maternity Hospital, a new National Forensic Mental Health Hospital and a number of oncology units.
In education, we have a major nationwide schools building programme in place to meet the demands of our growing population.
There are also major flood relief schemes for Cork and Enniscorthy planned to commence construction.
And addressing the issue of rural broadband, the Government has agreed on the roll-out of the National Broadband Plan throughout the country over the coming years.
So while there is clearly pent-up demand for infrastructure in many areas, the Government has already started construction on some much needed projects with many more planned to commence.
FUNDING CAPITAL INVESTMENT
I would like to address a number of issues in relation to the funding of our capital investment, including off-balance sheet options and Government borrowing.
First, let me welcome the announcement made last week by my former colleague, and now Vice-President of the EIB, Andrew McDowell, that the EIB will shortly be opening its first ever office in Dublin.
I would strongly advise members of the construction industry to investigate both the financing and top quality expertise which they can provide.
Turning to off-balance sheet funding options: alternative means of funding infrastructure were, as always, explored in developing the Capital Plan, in order to supplement the provision of infrastructure using traditional procurement.
This included a new third phase of Public Private Partnerships to a value of €500m.
The Government remains open to continuing to consider the potential for further alternative financing mechanisms, including off balance sheet PPPs.
However, such financing measures have a cost, and that must be recognised.
Nothing is free and although they may be off-balance sheet, they still need to be paid for.
Any use of such structures must therefore be carefully managed, to ensure that they are sustainable and affordable in the longer term.
It is neither possible, nor desirable, to seek to fund everything off-balance sheet.
In relation to the more traditional approach to increasing capital spending, using more money borrowed by the State on-balance sheet, while interest rates may indeed be low at present, any such borrowing must also be paid back.
This Government is committed to following the fiscal rules and their essential goal of avoiding the pro-cyclical tax and expenditure policies of the past, which were so costly.
So while there appears to be an infinite demand on the State’s resources to invest in enhancing our infrastructure, there is no free or easy money available to meet this demand.
ACHIVING MAXIMUM VALUE FROM INVESTMENT
Whatever the funding method adopted, we agree that our infrastructure investment must be based on sound evidence and form part of an overall strategy so that we are getting the maximum possible value for money.
Indeed upon my appointment as Minister for Public Expenditure and Reform, one of the first things I said was that I would never forget the word “public” in my title.
I do not allocate my money, or the Government’s money. I am responsible for the public’s money.
When we listen to any of the experts on the topic of infrastructure investment, they have the same message: there needs to be a concerted focus on getting project selection right in order to ensure that the underlying problem is addressed and that value for money is achieved.
John FitzGerald wrote on this subject in the Irish Times during the summer pointing out that it is vital that individual projects are selected on transparent criteria and well-established methodologies.
I could not agree more and I believe the Public Spending Code and establishment of the Irish Government’s Economic and Evaluation Service has made some strides towards achieving this objective.
I’m sure other speakers today, such as Edgar Morgenroth, will echo the sentiments of Professor FitzGerald.
PROCUREMENT POLICY AND CONSTURCTION 2020
One thing is certain, the construction industry will play an essential role in the delivery of whatever infrastructure is decided upon.
It is therefore important that Government takes into consideration the industry’s insights into how we can improve this delivery, which I have no doubt be forthcoming today.
The Government recognises that procurement is an area of crucial importance in the delivery of value for money.
Most businesses in the Irish construction sector fall into the SME or micro enterprise sectors.
– the introduction of a new self-declaration form,
– the European Single Procurement Document, or ESPD,
– fewer demanding turnover requirements, and,
– the promotion of the use of lots and consortia bidding.
These are designed to facilitate SME participation in public procurement.
The requirements in the directive on eProcurement are also a key SME enabler by reducing the administrative burden associated with participation in a procurement process.
There are a number of actions focussed on this topic of innovation and technology in Construction 2020, which tie in well in this regard.
One of the key aims of Construction 2020 is to deliver a world class, competitive and dynamic construction sector and the return to growth in the construction sector ffords us an opportunity to look to how the industry can develop over the coming years.
Similarly, technology offers the opportunity, if properly harnessed, to make the industry more attractive to investors, more efficient and above all a better and safer place to work.
As custodians of taxpayers’ money, it is our duty to ensure it is spent in the most efficient way.
Those who fail to take advantage of the opportunities technology offers will, ultimately, be less successful in winning public contracts.
Therefore as investment in the sector increases I urge you all to look at how you can work better by embracing appropriate technology to improve your competitive edge.
Finally, I would like to briefly address the issue of how we should plan for infrastructure investment beyond 2021 and take a longer term strategic view on what infrastructure will be needed in the future.
One crucial element of this is the National Planning Framework, which is being prepared by the Department of Housing, Planning, Community and Local Government and which Minister Coveney will, no doubt, mention later.
The National Planning Framework will provide a long-term, 20 year strategy for the spatial development of Ireland. As a consequence it should influence all future investment decisions.
In my own Department we have also been considering how best to seek to plan for future infrastructure needs.
We have followed with interest developments in the UK where they have established a National Infrastructure Commission charged with offering independent analysis and advice in relation to the UK’s long-term infrastructure needs.
The benefits of adopting a similar process in Ireland are currently being examined by my Department.
Long-term planning of this nature would also provide greater certainty to the market and yourselves, the construction industry, as to what infrastructure requirements are likely to be coming down the tracks and enable you to plan accordingly to ensure the capacity is there to provide it.
To conclude, Ireland now finds itself in a position where it can again begin increasing the level of capital investment and this Government has every intention of doing so responsibly.
Construction has already commenced on numerous major projects in the Capital Plan and many more projects will begin construction in the coming years.
This investment will be based on affordable spending levels which will avoid the ‘boom bust’ cycle witnessed by this country in the past.
It is therefore essential that the focus is not just on ‘capital spending’ but rather achieving greater value for money for our investment. It is crucial that we begin planning now for the infrastructure we will need in the future.
I have no doubt that together we will rise to the challenge of meeting the future infrastructural needs of our country.