Brendan Howlin (Wexford, Labour)

Last week I set out the Government's capital spending programme for the next five years. It was part of a series of important announcements leading up to budget day. It commenced with my colleague, the Minister for Finance, publishing the medium term fiscal statement on 4 November and tomorrow I will announce a series of reforms in the public sector.

As I emphasised last week when launching the capital review, the level of expenditure is based on what we can afford. In that context, we have prioritised the investments that are most needed in our economy and in our country. Other desirable projects will have to be put on hold until the public finances are repaired.

Our priorities as a Government are clear and are evident in the published plan. In summary, they are jobs, schools and health care. It is also based firmly on the fact that we are effectively at the end of a major phase of Exchequer funded capital investment. Over the past decade, €70 billion was invested in infrastructure and the productive sector. Judged by a range of measures, the quality and quantity of the country's stock of infrastructure has been considerably augmented in recent years.

While the plan presents the quantum of funding available over the medium term, it is also grounded in the reality that we need to reduce spending. Nobody in the House does not understand that. We know that this must be an over-riding objective. We need to reduce our deficit, regain our national sovereignty and put ourselves in a position where we have more resources available to make choices ourselves.

However, until then, we must make some stark choices, focus on key needs and delay or cancel some projects which have been planned for some time and which we would have been delighted to go ahead with if the resources allowed. For this reason, I am delighted that the Government is in a position to part-fund the construction of the new children's hospital with some of the proceeds from a new licensing arrangement for the national lottery which will involve an upfront payment in exchange for a longer-term licence. I will bring the details of this proposal to Government early in the new year. It is expected, subject to planning approval, that construction of the hospital will start in 2013 with initial enabling works to start next year. As I already said, in the absence of this innovative approach to funding the national children's hospital, it would have been a real struggle to meet the necessary funding requirements for what most Members of the House regard as a very important national facility.

This capital investment report is primarily about allocations through the public capital programme over the coming years. In addition to this, the Government is determined to maximise the use of all available resources to promote growth and job creation. The Government is pursuing a strategic investment strategy, which brings together a number of strands of non-traditional funding, through NewERA and the strategic investment fund to be developed into a strategic investment bank over time. Last week the strategic investment fund announced a new fund of up to €1 billion for investment in new and existing infrastructure in this country primarily aimed at the commercial semi-state sector. Other funds will be announced in the coming months and years. We will also pursue the PPP approach to deliver public infrastructure alongside more traditional procurement where it makes sense and offers value for money. Of course, I acknowledge that the private funding market for PPPs is very challenging. Bank credit is in sort supply internationally and our sovereign debt situation presents challenges and difficulties. I have asked my officials to actively engage with private institutional investors to see what might be possible to match our immediate funding requirements with their long-term income stream needs. A series of meetings has been organised to progress this matter. My officials are also in consultation with our European counterparts to explore best practice and similar initiatives in other jurisdictions. This work is being given immediate priority in my Department.

The capital review represents the findings of a Government-wide review of infrastructure and capital investment policy led by my Department. While I have been upfront that the level of resources available to us does not match the investment of recent years or, indeed, our ambition as a Government, it remains the case that this plan sets out a significant tranche of investment over the next five years - investment designed to facilitate economic growth and build our social infrastructure.

The potential negative consequences of reduced capital spending are tempered by recent improvements in the economy's infrastructure, perhaps best illustrated by completion of the new motorway network.

Despite very difficult budgetary parameters the capital investment programme for 2012-16 will amount to approximately €17 billion. In 2012, the allocation will be €3.9 billion, reducing to €3.3 billion in 2013 and stabilising for the remaining three years at €3.2 billion annually. As indicated, the profile of capital spend will now see an increasing share of our scarce resources focus on and allocated to jobs, schools and health care facilities.

Creating jobs remains a top priority for Government. A range of reforms of activation and training are in progress and the review commits major resources to the Department of Jobs, Enterprise and Innovation. While the need to address fiscal targets will require some reduction in the funding for research and development, we are ensuring that our direct supports to industry will be maintained in excess of pre-recession levels when total capital expenditure was, as a full quantum, at its highest.

This will enable the IDA to deliver on its Horizon 2020 strategy, targeting the creation of 105,000 new jobs and achieving 640 investments in the years 2012 to 2014. Enterprise Ireland will continue to support the growth and development of Irish enterprises in world markets. Its science technology and innovation budget will increase the number of high performance start-ups supported to 95 in 2012 and includes a new fund of €10 million to attract overseas high performance start-ups.

While the Science Foundation Ireland budget has been marginally reduced, the €156 million allocation will enable it to significantly enhance commercialisation opportunities emanating from SFI-funded research, in particular through the enhancement of the technology innovation development awards programme. Some €27 million will be provided for the programme for research in third level institutions and will go towards research in the areas of energy, the biosciences, arts, humanities, social sciences, medicine, pharmaceuticals, food and health.

An additional 70,000 pupils in school at primary and secondary level need to be provided. I have, therefore, allocated €2.1 billion specifically for the delivery of an additional 40 schools and the expansion and renovation of an existing 180 schools. This level of investment has squeezed out other possible investment in third level areas but we are in the business of prioritisation and the money must be put where it is urgently needed.

In addition to our plans to develop the national children's hospital, health capital investment has been sustained, an area I was most anxious to protect.

See this speech in context