Financial competence and "value for money" are issues that are likely to take centre stage in the general election campaign. Because of that, rejection by Minister for Finance Brian Cowen of the urgings of the Economic and Social Research Institute (ESRI) to limit capital spending in the forthcoming National Development Plan is hard to understand.
Mr Cowen garnered brownie points from an edgy electorate in recent months by promising that there would be no pre-election splurge in spending of the kind engaged in by his gung-ho predecessor, Charlie McCreevy. And, following better-than-expected Exchequer returns for the third quarter, he offered further reassurances of fiscal probity in relation to the coming Budget. That profile of competent management is now under scrutiny.
Intervention by the ESRI in the process of political horse-trading involving the National Development Plan, 2007 to 2013, will have been as welcome as an after-dinner burp in polite society. Ministers have spent months fighting with the Department of Finance for extra departmental resources and for increased spending in their constituencies on roads and other capital projects. For them to be asked to scale back their demands at this stage would be inviting political apoplexy. It would also take some of the gloss off a major pre-election document.
In spite of that, the recommendations from the ESRI make good sense. It takes the view that the Government will repeat the mistakes of the past and receive poor value for money if it holds to its projected spending plans on new capital projects. A rapid increase in spending will generate inflation within a construction industry which is already stretched, as happened under the last plan in 2000, and the taxpayer will foot the bill. Instead, it suggests that the Government should scale back its projects, at least initially, and concentrate some of that investment in particular areas.
Projected spending on schools is identified as a major flaw in the nascent plan. With an extra quarter of a million workers now in the economy, places for an additional 50,000 primary school pupils will be required by 2013. Already, in the extended commuter belt surrounding Dublin, some children are being denied education in local schools because of overcrowding. And the anger of frustrated parents is growing. That issue has to be addressed as a priority.
A proper cost/benefit evaluation by the Department of Finance of all major projects should be automatic, but is not. Value for money is essential in a situation where the economy is expected to slow and funding is likely to become more uncertain. At the same time, our infrastructural deficit has to be tackled to provide for future growth. Finding a balance between these competing demands is Mr Cowen's responsibility. A downturn in the housing market may call for major capital projects to underpin the construction industry. Until that happens, however, capital spending should be held in check.