Spending on capital projects takes a hit as austerity wins out over stimulus

IN JULY of last year, as the Fianna Fáil-Green coalition struggled desperately to address the gaping hole in the public finances, it decided to cut back heavily on infrastructure projects in order to save some money.

A document was published setting out the “infrastructure investment priorities” for 2010 to 2016. But while there were cutbacks, it still envisaged spending some €39.4 billion on capital projects such as roads, railways, hospitals and schools over the period in question.

Of that, some €27.5bn was to be spent between 2012 and 2016.

Not any more. With the economic crisis continuing and growth rates revised downwards, the Fine Gael-Labour coalition has decided to trim that figure significantly.

Instead of €27.5bn being spent between next year and 2016, the amount will now be circa €17bn.

The size of the reduction inevitably means some big-ticket items have been scrapped — Metro North, which was meant to run from Dublin city centre to the airport, is now gone. So too is the Thornton Hall super-prison, which was meant to relieve the serious overcrowding and squalid conditions in the prison system. Technically, these projects are being “deferred” rather than abandoned — but it seems incredibly unlikely they will see the light of the day in this Government’s term.

In a broad sense, it means that austerity has again won out over stimulus — although that was always going to be the case, given that the Government is locked into the EU-IMF bailout programme.

“While there may be advantages to continuing with a high level of capital investment in order to give stimulus to the economy, the need to reduce public expenditure and close the fiscal deficit is a more compelling policy goal at present,” the new framework states.

The projected spend on health, transport and enterprise projects have been listed elsewhere on this page.

Here is a summary of other areas detailed in yesterday’s document:

* EDUCATION By 2016, it is estimated that there will be 70,000 additional pupils in primary and secondary level. The framework provides for the delivery of 40 new schools and expansion or new buildings for another 180.

At third level, projects where contracts have already been signed will continue. These include the UCD Science Centre, the University of Limerick Medical School and NUI Maynooth’s library project.

But projects where contracts have not yet been entered into “will not be advanced”. Among the high-profile casualties is the Dublin Institute of Technology’s proposed Grangegorman campus development, for which investment is being “postponed for the lifetime” of the framework.

* ENVIRONMENT The Government intends to invest about €1.6bn of its resources in water infrastructure between now and 2016. The figure was closer to €2bn in last year’s plan.

But separate to that investment, water charges are coming, though not immediately.

The coalition, in line with the bailout programme, intends introducing charges from 2014. Here’s how the framework puts it, in typically bureaucratic language: “The Government will continue a significant level of support in the short term, but is committed to a transition to a non-exchequer based funding model no later than the start of 2014.”

* FLOOD DEFENCE Funding of €45m per year will be made available for flood-risk management and mitigation. This is a significant cut — under last year’s plan, it was envisaged that the annual spend to 2016 would be around €70m. Areas where projects will continue include Clonmel, Mallow, Fermoy, Ennis, Waterford and Carlow.

* AGRICULTURE, FORESTRY AND THE MARINE This sector is seen as a potential growth area for jobs, and the Government says it will invest about €860m in a “range of supports” between now and 2016. Examples include investment in food industry marketing, an “ambitious” afforestation programme” and the continued development of fishing harbours. The overall budget is broadly in line with last year’s plan.

* TOURISM Increasing tourist numbers to boost the economy is a priority for the Government, but again, ambitions will be hindered by lack of money. In all, the coalition says it will invest about €81m — in total — between now and 2016 in tourism infrastructure.

This is a reduction from the €138m envisaged in last year’s plan.

Funding will be provided for projects already committed to, such as the Book of Kells visitor centre in Trinity College Dublin, the Viking Triangle in Waterford, and the Great Western Greenway in Mayo.

But “when it comes to future commitments, priority will be given to relatively low-cost projects to enhance or renew existing attractions and provide new ones”.