Finance Minister Paschal Donohoe has accepted the €3 billion National Broadband Plan is an “unprecedented risk,” but insisted it is a risk worth taking.
Defending his decision to eschew stark warnings from his most senior officials about the plan to the State, Mr Donohoe said “on balance” seeking 100% broadband coverage across the country deserved to be approved.
Ahead of their Cabinet meeting on Tuesday, ministers were warned by senior spending officials that proceeding with the National Broadband Plan would constitute a “breach of the public spending code”.
In memos, given to ministers in advance of their decision to approve the €3 billion plan, officials warned that the project failed a value for money examination and it represented a potential threat to the financial well-being of the State.
“We strongly recommend against approval of the appointment of the preferred bidder to the current NBP procurement process on the grounds of: cost and affordability, impact on the National Development Plan and on projects forgone as a result, value for money and specifically uncertain benefits, unprecedented risk for the Exchequer and compatibility with Project Ireland 2040,” Robert Watt, Secretary General of the Department of Public Expenditure said.
Officials warned that the reallocation of funds for broadband “would have serious implications” for other planned investments, which would require the cancellation or delay of a wide range of projects.
To fund broadband, the officials warned that a reduction of €300m in the Department of Housing would be required, meaning the cancelling the delivery of €1,500 social houses.
It will also mean a €200m reduction in Transport which equates to the entire budget last year for repairing regional roads. In health, it will mean the cancellation of eight primary-care centres and in Education, it will mean a hit of €130m and the axing of 26 primary schools.
In terms of value for money, Watt and his officials said they had “major concerns in relation to the cost benefit analysis”, saying the justification for the cost “has not been demonstrated satisfactorily”.
The officials warned:
Watt and his officials also expressed concern that “the State will not own the asset, despite investing up to €3 billion in it (as compared with a private sector investment of only [figure not given]...It is a challenge to conclude that this contract represents value for money or in the best interests of the taxpayer”.
Mr Donohoe denied that he ignored the advice of department officials on the National Broadband Plan and admitted that he wrestled “deeply” with the decision.
He said he decided against his officials' advice not to sign up to the current national broadband plan because on balance there are safeguards and contingencies in place to manage risk.
"As minister, I have to receive advice, but I ultimately have to make a decision in relation to what to do.”
"On balance I believe the proposal we have in front of us is the best way of delivering the additional connectivity that parts of our country have been demanding for so long".
Mr Donohoe said he had to weigh up the consequences of going ahead with the project or cancelling it and believed that on a comparative basis proceeding is the right decision to take.