Last Friday saw the publication of two very important documents – the National Development Plan (NDP) and the National Planning Framework. The policies they outline will play a key role in determining the path of economic and social change in Ireland over the next two decades.
Because of the financial crisis the previous national development plan, published in 2006, had to be abandoned by the end of 2008. The result was a stop-go pattern in the limited investment undertaken since that point.
Departments were unable to plan a number of years ahead. That meant they could not commence many important projects, even those they could fund in the initial year, because of the uncertainty about funding availability in future years.
The new National Development Plan makes provision for multi-annual funding which will allow a range of important transport, health, energy and education projects to be undertaken over the coming decade.
The current very rapid growth in the economy means that in a number of important areas the economy is “outgrowing its clothes”. We also need to plan ahead for anticipated significant population growth. New schools are needed for more pupils; new homes are needed for our growing population; and new investment in transport infrastructure is needed to get people to work.
The current plan is the fifth in a series. This type of national development plan, setting out a structured approach to future public investment, was first introduced in 1989 at the behest of the EU, which wanted to see a programmed approach to the investment that it was substantially co-funding. Investment planning on a medium-term basis became the norm, replacing a previously haphazard approach.
More important
As a condition of its funding the EU required the plans to be based on evidence of where investment should be prioritised to best promote economic, social and environmental progress. The requirement for evidence-based investment decisions was probably even more important than the actual funding itself. Prior to that, evidence had played little role in such decisions.
Monitoring and review requirements built-in to the process also led to investment decisions being revised where they were not delivering value. As a result, both Irish and EU taxpayers got much better value for money.
Partly because key features of the plans were underpinned by evidence, no dramatic changes took place over the course of successive medium-term plans despite governments changing. Naturally new governments undertook some limited reprioritisation to reflect their different interests.
With the gradual wind-down of EU funding after 2000, the external imperative to base investment plans on evidence was lost. In examining the last NDP, published in 2006, it is striking how much less detailed evidence was available to allow appropriate prioritisation of projects within and across the different sectors. While the EU had ensured that the taxpayer got better value for money in the 1990s, the following decade saw a move backwards to more ad hoc decision-making.
Specific projects
The new NDP was accompanied by a range of documents, but very little supporting evidence was made available to explain why specific projects were chosen and why certain areas for investment were prioritised. Any underpinning evidence needs to be made readily accessible to the public so we can judge the quality of the decisions made, and see which decisions are lacking a clear rationale.
For example, anyone who has driven from Cork to Limerick knows how important it is to dramatically improve this road. However, the decision to build the road to motorway standard, rather than a cheaper high-quality dual-carriageway, needs some justification in terms of future traffic volumes and value for money.
An investment programme on the scale of this NDP will have significant macro-economic implications. Unlike all previous NDPs, the failure to address these implications is a glaring omission.
Construction bubble
In relation to the 2006 NDP, the ESRI pointed out at the time that its scale would inflate an already growing construction bubble. It had recommended that either a smaller investment plan be implemented or that action be taken, via tax measures, to restrict commercial building activity to make space for the NDP. The then government was unhappy with this recommendation, and continued to inflate the bubble. The rest is history.
Given that the Minister for Finance has repeatedly expressed concerns about the possibility of overheating in the economy, it is surprising that the NDP documents do not analyse this problem. It is urgent that the macro-economic implications are teased out and addressed before implementation of the NDP begins in the next budget.
