Capital spending - Bitter lesson we should never forget

IT was inevitable that yesterday’s announcement of a six-year revised capital investment programme would have to take the “pace and depth” of changes in our economy into consideration.

Any other course of action was not an option for a country trying to restore some sort of equilibrium to its out-of-kilter finances.

Investment has been reduced from an anticipated €56.6 billion to €39.43bn. This represents a cut of 31%. All of the capital will have to be borrowed from various banks, some of which created the mess that forced the drastic cuts in the programme.

Nevertheless, Taoiseach Brian Cowen yesterday afternoon announced a package – called Infrastructure Investment Priorities 2010-2016 – just shy of €40bn. The programme is scheduled for completion in 2016, so we can expect a bonanza of ribbon-cutting to compliment the flag-waving and cheers which will inevitably mark the 1916 centenary.

It is sobering too to put the cost of the six-year package in context. The total is less than twice the figure needed to save just Anglo Irish Bank from the consequences of its recklessness.

It is astounding that just one relatively minor bank needs, more or less, the equivalent of three years’ capital investment programme for the entire country to stay in business. In this light it is increasingly difficult to accept that, nearly two years after the banking crisis changed all of our lives, that no one has been brought to book over any aspect of that insanity. How much longer are we expected to wait while “investigations are advanced as fast as they can be”?

Nonetheless, yesterday’s announcement is good news that would have been better news had more funding for more projects been available but, as we have by now accepted, this is where we are.

As the Irish Congress of Trade Unions put it – “Could have been worse, but should have been bigger.” ICTU argued that the investment should have been much bigger. “We have a serious infrastructural deficit, mass unemployment in construction and related occupations and the wider economy needs a greater boost than this package will deliver,” they argued.

That may well be the case but, as it is entirely dependent on borrowed money, not everything is possible.

It is appropriate that the main thrust of the programme will address public transport, roads, schools, health facilities, the environment, energy efficiency, broadband, research and development (RD) and support for jobs and enterprise.

Something approaching half of the investment is dedicated to public transport in Dublin city – the Metro North and the Dart underground projects. This may seem disproportionate but it does little more than reflect the almost incessant population growth concentrated around the capital. However, €14.7bn out of a package of €39.43bn is a considerable slice of the cake – let’s hope it proves a good investment.

Yesterday was a day for broad headings and, as ever, the devil will be in the detail. The package was unavoidably about holding the line as anything that was not essential had little chance of funding.

That is the real tragedy and crime of our circumstances; there is so much we would like to do, so much we should do but so much we cannot even consider.

This is a bitter lesson and we must never forget it.


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