Little space for long-term capital investment vision in election promises

Electioneering is all about snappy promises and clever sound bites. There is little space for setting out a long-term vision. There are few votes in talking about sewers, drains or reservoirs, yet our capital investment spending is likely to determine the country’s prosperity 10 or 20 years down the line.

Spending on infrastructure all but collapsed after the 2008 crash.

This, in turn, delayed the roll-out of flood-relief programmes, the consequences of which have been there for all to see in recent months.

The housing crisis is another consequence of years of capital starvation at local government level.

The Government has been playing catch-up.

The economic recovery has resulted in much heavier demands on existing capital resources and in extra funds becoming available.

Late last year, the Government unveiled a €27bn capital investment programme, covering the six-year period to the end of 2021.

The plan looks good on paper, but it has been criticised for lacking ambition.

Economist Paul Sweeney, of Tasc, says the State should be spending an additional €15bn, to take advantage of historically low borrowing rates. Last December, he suggested that funds could come, in part, from the proceeds of a privatisation of Irish banks.

However, the recent collapse in bank shares has hit the prospect of any bank flotation in the short term.

The pensions industry could play a greater part in funding a roll-out of infrastructure. This is a natural fit. The funds invest for the long term and seek security, as opposed to stellar short-run returns.

But the industry needs to tackle its own conservatism, which is a product, in part, of law, with tight restrictions or duties of care imposed on trustees.

If the funds were to flow, we could begin to take the chance on a low-interest rate environment to start tackling gaps in our capital network.

Engineers Ireland, which represents 24,000 engineers, is critical of the neglect of key areas of infrastructure. It is seeking a doubling in investment, to 4% of national output.

Its director, Caroline Spillane, points to Ireland’s relatively low ranking, of 27th place, on infrastructure in the Global Competitiveness Index.

In its ‘State of Ireland’ report, last year, it awarded low grades, Ds, to the rail network, to non-primary roads, and under the heading of ‘sustainable transport’.

The country’s water and waste services received a ‘C’ grade, along with flood defences. The energy sector, and our airports, received a ‘B’, along with the communications network (a surprising accolade, given the state of our rural broadband).

In its upcoming report, the body is likely to focus on investment in energy (with flooding, presumably, also getting more attention).

Boosting the spend will be of little use if the funds are scattered like confetti.

The punters will be looking for cash for sexy local projects (such as football stadia).

Those demands must be resisted. Priorities must be established, such as motorways connecting provincial cities, decent nationwide broadband, water, and flood relief.

In Britain, a new Infrastructure Commission has been set up to ensure proper, long-term planning and resource allocation.

Tasc favours this approach, while Engineers Ireland goes further, seeking a super junior ministry for infrastructure.

British expert, John Armitt, believes that inter-agency co-operation is vital, saying that this approach explains the success of the London Olympics.

A change in political culture is required. Under General Charles de Gaulle, 1960s France led the way in the development of capital projects.

There was real direction at the top. The continent of Europe, in the post-war period, had no choice but to invest to rebuild.

As a result, it stole a march on a UK that was obsessed by a succession of balance-of-payments crises.

Britain fell behind, while impoverished Ireland languished in the slow lane, with a road network largely geared to the horse and cart.

However, we did find the resources to fund TB hospitals and an ambitious programme of public housing.

The bureaucracy has lost much managerial expertise in recent years.

Rebuilding this will take time. Our planning system is also in need of overhaul. While citizens must retain a role in decision-making, the ability of individuals to hold up projects appears to be excessive.

Engineers Ireland favours the creation of a national infrastructure unit within the Department of the Taoiseach.

A similar approach worked well in the late 1980s, at the time of the launch of the IFSC financial centre.

The unit would attract senior officials from key spending departments and from the Department of Finance.

Locating it in the Taoiseach’s department would ensure that Merrion Street — while having a guardianship role — would not be allowed to smother project proposals at birth.

Correctly, Engineers Ireland believes that projects should be independently assessed by an expert (who would, presumably, operate at arm’s length from the well-financed special interests pushing their pet projects).

Britain’s Andrew Adonis, a member of the House of Lords, has led the way in pressing for new approaches to capital projects. He talks about the science of delivery of public projects.

Such a delivery unit was set up by the Blair government, with a tight focus on well-designated targets.

The recession there caused public net investment to crash to just 1.5% of GDP. Among the results of this: crowded trains and congested highways.

However, John Armitt believes — somewhat controversially — that it would all be a lot worse had not Britain’s railways been privatised.

As a result, vital investment, not otherwise available, was attracted in.

A key problem, in the past, has been that people have not been able to invest in long-term projects with the assurance that the rules would not be changed halfway through the game, by an incoming government or cabinet minister.

Armitt singles out Chancellor George Osborne’s recent crackdown on the solar industry for criticism.

Two-thirds of the funds for capital projects in the UK come from private finance. Investors require a climate of confidence.

They need to be able to take a 20-30-year view on their investments, not a two-three year one. Ireland, too, will require private finance, but the taxpayer will have to stump up, at the same time.

This message needs to be spelled out.

We simply cannot get proper infrastructure on the cheap, whatever certain politicians might have one believe.

Beware of slick promoters promising the sun, moon and stars, but slipping-in the small detail with some long-lasting financial stings.

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