Making sure the investment in the National Development Plan is worth it

The new National Development Plan (NDP), covering State-backed investment to 2030, was published on Monday. Compared with previous NDPs, it is more of a menu than a detailed programme of work. Prioritising the projects to be implemented in the coming years remains a work in progress.

While one might wish for more certainty about the programme of investment that will be implemented, it has always been the case that some flexibility within the NDP has been necessary. In the past this was formalised through a mid-term evaluation process.

We need more clarification on the investment programme for the immediate future. Presumably the budget will provide more concrete information.

The periodic NDPs, which set out the State’s medium-term investment programme, began in 1989. At that time a lot of the funding came from the EU Structural Funds, and the EU required a formal plan to ensure that they got value for money. As part of this process, they sought detailed research on the value of the planned investment.

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This set the pattern for subsequent NDPs, and it also produced better value for the Irish taxpayer.

Twenty years ago, as the EU money became much less important, the Department of Finance paid less attention to the detailed project level evaluation needed to ensure value for money for Irish taxpayers. Since the financial crisis, the build-up of the Irish Government Economic and Evaluation Service has seen a return to the detailed value for money analysis of the 1990s.

In the 2000s, the one area where substantial research took place was on the macroeconomic consequences of the planned investment. Studies undertaken by the ESRI in 2003 and 2006 highlighted the fact that the NDPs were too ambitious.

These reports suggested taxes would need to be raised to reduce private sector building activity, to make space for the government’s investment. Alternatively, the NDPs should have been scaled back. Unfortunately, this advice was not heeded, and the construction sector overheated and exploded in 2008.

A preliminary macroeconomic assessment of the current NDP was published this summer. Referring to the lessons of the 2000s, it suggested that the ability of the economy, and particularly of the construction sector, to deliver all the planned investment, would need attention in implementing the new plan.

Hopefully, as part of the budget process, this research will be taken a step further, and provide a clearer assessment of whether the full programme of investment next year of more than €11 billion is deliverable without serious inflationary consequences.

Transport investment

Over the period to 2025, the NDP provides for investment in transport of up to €13 billion. The projects chosen for implementation should be prioritised through a formal assessment of their value for money, rather than driven by a commitment to absolute amounts for different types of transport. This assessment should take full account of the very high cost to society of continuing to emit carbon.

There has long been a good methodology for prioritising investment in roads. While this needs to be updated to take account of the much higher priority today of reaching zero carbon emissions, it also considers a range of other factors. Most important of these is the time saved by travellers, including business and freight, as well as safety considerations. Even with a high penalty for carbon emissions, it is likely that significant road investment will be justified as new roads completed by 2030 will, over their lifetime, be used mainly by electric vehicles with zero emissions.

The costs and benefits of public transport investment should also be assessed within a similar formal framework. In the case of some investments, such as Metro and light rail, their benefits will begin to accrue only after 2030. Nonetheless, they will play an essential role over the following years in developing zero-emissions living in Ireland by 2050.

The evidence from the investment in the Luas Green line is that once construction begins, dense development clusters around the new line, substantially improving the payback to society and reducing emissions. To bring about such densification, certainty is needed that the infrastructure is coming.

A similarly rigorous approach should be applied to assessment in cycling and walking infrastructure, factoring in the societal benefits of walking or cycling to school, and quantifying the switch from other less climate-friendly forms of transport. If the main switch is from bus to bike, the net environmental gain is lower than if it secures a switch from car to bike.

These project-level appraisals, that count in environmental benefits, should then determine the appropriate mix of investment across different modes of transport.