AFTER ALL the talk about “shovel-ready” projects and the need for economic stimulation, the Government has promised more than it can deliver, at least in the short term. It is a weakness in Irish politics. Capital projects are announced – and then re-announced – long before work can begin, in order to look busy and attract votes. This long-standing practice has encouraged cynicism and public disillusionment.
A decision to spend an additional €2.25 billion on a variety of projects in health, education, justice and transport cannot be faulted at a time when unemployment exceeds 14.5 per cent. The work schemes will be spread around the State and have a capacity to generate 13,000 jobs. All of that is positive and to be welcomed. But, in offering unrealistic hope of early employment, the announcement is seriously misleading. Ministers may regard the exercise as a means of reigniting confidence in the economy and encouraging other forms of investments. All it does, however, is expose the bare nature of the exchequer cupboard along with the State’s continued reliance on the EU-IMF bailout and funding from the European Investment Bank (EIB).
Employment in public private partnership (PPP) schemes will not start until 2014, at the earliest. Completion dates may run into 2018. The timescales may be normal where new PPP contracts are concerned. But this is not what the electorate was led to expect when Ministers spoke of delivering “shovel-ready” projects. Similarly, the €2.25 billion announced for these schemes will be raised in two parts, the largest portion coming from the EIB, the National Pension Reserve Fund, the domestic banks and pension funds. Some €850 million will be raised at a later stage from the sale of State assets. The exercise represents another work in progress.
A Government initiative of this nature was never, of itself, going to seriously reduce unemployment levels. But it will fill some public service gaps. Of much greater importance is the need to ensure that credit is made available to viable, struggling businesses by the banking sector. After all, that is why financial institutions were rescued by the State in the first place, at a huge cost to the taxpayer. This year, the Government set the banks a lending target of €3.5 billion for small and medium enterprises. The figure may not be reached. Overall, lending transactions fell by 15 per cent in the first quarter. Having fuelled a property bubble with crazy lending practices, the banks now appear to have withdrawn from all risk-taking involving enterprise. That is not good enough. It is particularly disturbing when one-third of all business complaints concerning an unjustified refusal of credit have been upheld by the Credit Review Office.
Small businesses are the most effective providers of new jobs and they require adequate funding. On his return from discussions with ECB chief Mario Draghi concerning the State’s exposure to banking debt, Minister for Finance Michael Noonan should have harsh words with those concerned.