EU shift in lending policy allows McCreevy to fund vital projects
The change, which follows intensive lobbying by the Government, was welcomed by the Construction Industry Federation which said it should allow the Government to really drive forward the National Development Plan.
Transport Minister Seamus Brennan also welcomed the decision, saying he believes it will free up more funding for the transport sector.
However, the Department of Finance played down talk of a major windfall for infrastructure as they are already committing 5% or double the EU average to such projects.
"Individual projects like the Cork School of Music are up to the departments responsible. The EU ruling basically clarifies the accounting rules and makes it easier to plan spending for the future," said a spokesperson.
Under the existing rules, the full cost of projects is charged in the first year, which could push Government borrowing over the current maximum level of 3% allowed by a stability pact.
A more flexible interpretation of the rules means the Government should be able to spread the borrowing charge over a number of years.
The development is likely to mean speedy progress on a number of infrastructure projects funded jointly by the government and the private sector, including toll roads and the Dublin Metro system.
With a very low level of national debt, Ireland should be able to borrow more than it does for investment in essential infrastructure projects.
It could also lead to increased use of joint public and private funding for government projects.
A statement from the Department of Finance yesterday said departments will not be allowed an addition to the money they have been granted for projects funded under public private partnership schemes (PPP).
"There is already a very challenging target of almost €5 billion in PPP projects. The focus should be firstly on delivery of this target," the department said.
They are also concerned not to inflate building costs - which happened in the late 1990s - and to ensure they get value for money.
It added that ultimately, the money and the interest on borrowing had to be paid back over time by the taxpayer.
The new rules will only apply to PPP projects where the private investor takes the main risk.
Under the new method of calculating, the budget deficit for next year and 2006 may improve by about 0.1% or €100m to €150m while the General Government Balance will improve retrospectively for 2002 and dwindle in 2003 and 2004 by about €2m.
