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Capital spending must not be hijacked by ‘new politics’

We desperately need new infrastructure, but we cannot allow special interests to dictate it

A decade ago, a recently-appointed senator commissioned a study from the Oireachtas research service which estimated that every journey on the Metro North over a 30-year period would cost taxpayers €22.

This was based on the proposed cost of the project and passenger projections and assumed that fares would cover the day-to-day running costs of the service.

Fast forward 10 years and the Metro North looks set to be a centrepoint of State capital investment plans in the years ahead.

The then senator who commissioned the research, Paschal Donohoe, is now Minister for Finance and Public Spending and is expected to signal in Wednesday's summer economic statement that the amount of cash to be allocated to investment spending will be increased in the coming years.

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If this is to happen, then we simply have to get it right. Getting it right means two things. It means picking the correct projects - the ones that will yield the highest economic and social return. And it means getting things built quickly and at a reasonable price.

Our need to invest in public transport does not necessarily mean that Metro North is a good plan

Our record on all of this over the years has, to put it charitably, been a bit mixed. And if project selection is driven by party politics - whether national or local - then we will be in real trouble.

The State has underinvested in recent years - there can be no argument about that. The shortage of social housing is the most obvious sign - and one of the most socially damaging - but there are plenty of other examples.

When the crisis came, Government spending was cut. Politically, Government investment spending is always the easiest to cut - the pain comes a few years later.

However, the political push is now behind increasing capital spending and, needless to say, many of the key business and social lobby groups are in favour of this and are trying to bend the agenda in their own direction.

Lobby groups exist, in part , to get governments to spend money on their priorities. Lying behind the lobbying is the unspoken and seemingly unchallengeable “trust” that investment is a “ good thing”.

Complicated reality

The reality is a bit more complicated. As Prof Alan Barrett of the Economic and Social Research Institute put it at an Oireachtas committee hearing on Budget policy: "The catch-all notion that capital expenditure is, always and everywhere, a good thing should not be allowed to filter into the discussion."

In our rush to address the obvious problems, this is a real risk. Our need to invest in public transport does not necessarily mean that Metro North is a good plan. Likewise, regional development may - or may not - mean that the proposed motorway between Cork and Limerick should be built.

The Department of Public Expenditure has put in place new and tighter guidelines to evaluate investment plans - and spending in general - over the past few years.

There is an obligation to do a cost-benefit analysis and justify the project. Rules are set down for doing this and anything with a spend of more than €100 million must be signed off by Cabinet.

This evaluation process will now be tested as the Government aims to up spending through a number of routes, including allocating a bit less to the much-discussed rainy-day fund from 2019 onwards.

With borrowings available cheaply on the international markets and a clear infrastructure deficit in some areas, it is a reasonable time to increase investment spending, but only if the projects yield a return either in terms of economic or social objectives, or both.

The discussion to come needs to have a context. We are not flush with cash and still have a national debt of some €200 billion. There are threats ahead from Brexit and a slow rise in interest rates.

If the “new politics” pushes project selection into some kind of political carve-up, then we will not get a proper return from the money spent and will simply be loading ourselves with yet more debt to repay.

Whether we pay a few million less into the rainy-day fund is not really the issue. The key consideration is picking the right projects and spending the money correctly.

And when you think about it, this should be done as part of the new National Planning Framework, which Simon Coveney had been working on in his previous ministerial role.

The project is the kind of joined-up thinking we have been poor about in the past, particularly in relation to regional development, which is now a vital consideration given that some of the regional areas are most exposed to Brexit’s impact.

Completing projects

The other key thing is to be able to get projects up and running and completed. From the National Children’s Hospital to the National Broadband Plan, we can see how politics, bureaucracy, planning and the legal system can combine to delay things for years.

Big investments take time, but there seems to be something in Irish legal and planning laws which all-too-often creates interminable delays.

When you have limited resources and a lot of demands, getting your priorities right is key

We do desperately need more investment - in areas such as housing, water, waste and rural broadband. You could say this was now mission critical. But we can’t let this process be hijacked by either party political or business interests.

The queue is already forming looking for money to be spent here, there and everywhere.

I don’t have a particular “for or against” position on Metro North, but I’d like to see the case set down and compared to alternatives. After all, the €5 billion plus it will cost represents more than the exchequer spends each year on all capital investment projects.

When you have limited resources and a lot of demands, getting your priorities right is key.