Mr. Seamus McCarthy:

The appropriation account for Vote 29, Environment, Climate and Communications, records total expenditure of €664 million in 2021. This was 55% more than the €428 million spent in 2020, but fell almost €105 million short of the total expenditure provided for in the Vote for 2021. Receipts into the Vote during the year amounted to €12.3 million, slightly ahead of what was budgeted for and the result was a net surplus at the year end of just over €106 million.

The standard requirement is for any voted funds remaining unspent at the year end to be surrendered to the Exchequer. However, the Minister for Public Expenditure and Reform may allow up to 10% of unspent capital funding in a Vote to be carried over for use in the following year. The Department of the Environment, Climate and Communications was allowed to carry over the maximum amount from 2021, around €58 million, and the balance of €48 million was duly surrendered.

Expenditure in 2021 on the communications programme amounted to €164 million. This was €85 million less than budgeted for, mainly because of lower-than-expected spending on implementation of the National Broadband Plan, NBP. Anticipating the spending shortfall, €52.5 million was moved from this programme to two others, using the Supplementary Estimate process. The largest block of spending under the Vote was on the energy programme, with €327 million charged for 2021. The bulk of this, €291 million, was charged to the B.4 sustainable energy programme subhead. However, the charges included the transfer of €160 million to the Department’s energy efficiency national fund in December 2021. As note 7.2 to the account explains, this transfer remained unspent at the year end. The result was that actual expenditure under the sustainable energy programme in 2021 was, in fact, only around 3% up on the 2020 level.

The Department spent just under €128 million on the environment and waste management programme in 2021. Of this, €49 million went to support the operations of the Environmental Protection Agency, EPA. The continuing costs associated with landfill remediation are also funded under this programme and amounted to €21 million in the year.

Members may wish to note that the Department is responsible for oversight of a broad range of public sector bodies, including the communications and utilities regulators and major commercial State bodies such as the ESB, EirGrid and the National Oil Reserves Agency, NORA. The bodies are listed in an appendix to the appropriation account.

Turning to the report, the objective of the national broadband plan, NBP, as members will be aware, is to ensure that access to a high-speed broadband service is available to all residences and businesses in the State. Roll-out of the service is focused on those parts of the territory of the State where commercial providers of broadband do not provide a service or do not have plans to invest, collectively referred to as the intervention area. National Broadband Ireland, often referred to as NBI, was contracted by the Department in late 2019 to deliver on the broadband plan objectives.

Contractual arrangements between public and private entities to provide infrastructure and operate services typically focus on the identification of project and operating risks and on who bears responsibility for them. The agreed risk allocation is reflected in the financial costs or rewards factored into the contract. In the case of the broadband plan, the overall Government subsidy is capped at €2.7 billion, with most of this payable over the initial infrastructure build phase. This is currently expected to conclude by January 2028.

At the time the examination was being completed, the infrastructure build plan was running about 12 months behind schedule. The target for the number of premises to be passed by end January 2022 was originally 115,000. As permitted under the contract terms, NBI proposed in March 2021 that this target be reduced to 60,000 premises passed. The actual number of premises passed at end January 2022 was 34,456, just 30% of the original target and 58% of the revised target. However, it is good to note that the take-up rate for the broadband service by the occupiers of the premises passed is higher than originally projected.

The delays in the plan roll-out have resulted in total subsidy payments to end 2021 amounting to just over €177 million. This represented less than half of the subsidy payment originally provided for in the Vote for 2020 and 2021. In addition, under the contract terms, certain financial sanctions apply to underachievement of the revised delivery targets. The Department has accepted that approximately two thirds of the delay to date was due to the impacts of Covid-19 restrictions but has imposed sanctions for delays it considers relate to issues within NBI’s control. By end August 2022, build delay sanctions totalling almost €135,000 had been imposed. Separately, a performance sanction of €22,500 has been applied based on performance reports up to end April 2021. As the examination report was being finalised, the Department was carrying out a review of performance reports more recently received from NBI, and further financial sanctions may arise from these. The Accounting Officer will be able to update the committee on the current status of this work.