Brendan Howlin (Wexford, Labour)

I am happy to be back in the Seanad again so soon. Last week, I presented the Government's capital spending programme for the next five years to Dáil Éireann, having announced it the previous Thursday. It was part of a series of important announcements leading up to budget day, which commenced with my colleague, the Minister for Finance, publishing the medium-term fiscal statement on 4 November, followed by my announcement of a series of reforms in the public sector on 17 November.

I welcome the opportunity to discuss the capital review with the Seanad today and hope that we can have a productive exchange of views. As in all other matters, I have a very open mind to views that are expressed. All decisions are difficult, especially in times of retrenchment, and I am aware that Members would like if more projects were proceeding. We regret having to delay projects but I am interested to hear the reflections of Senators on the programmes I have announced.

It is important to reiterate at the start of this debate that the capital allocations I have announced are based on what we can afford. It is not a wish list, although I am aware that others would like to expand them. In that context, we have prioritised the investments that are most needed. Other desirable projects have to be put on hold until the public finances have improved. The Government's priorities are clear and are evident in the plan - jobs, schools and health care. The plan 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, some €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 the last decade.

The plan is grounded in the reality that we need to reduce spending, which is an inescapable reality. Thus, there has been a reduction in the quantum of expenditure over the medium term. This must be our priority. We must reduce our deficit, regain our national sovereignty and put ourselves in a position where we have more resources available again. We have had to make some stark choices. We must focus on key needs; hence, we have had to delay some projects that had been planned for some time.

However, one project that we are happily in a position to part-fund is the construction of the new children's hospital. When I say "part-fund" I mean that complete funding will be provided, but from two different sources. We will supplement this with some of the proceeds from a new licensing arrangement for the national lottery, which will involve an up-front payment in exchange for a longer term licence. Details of this proposal will be brought to the Government early in the new year. It is being worked out in detail at present and is obviously commercially sensitive. Subject to planning approval, it is expected that construction of the hospital will start in 2013 with initial enabling works to start next year. Without this innovative approach, it would have been a major challenge to find the necessary funding for this important national facility.

The capital investment report lays out the public capital programme allocations for the coming years. In addition, the Government is determined to maximise the use of all available resources to promote growth and job creation. We are pursuing a strategic investment strategy, bringing together a number of strands of non-traditional funding, through NewERA and the strategic investment fund. On the day of the announcement of the public capital programme, I announced that the strategic investment fund is now in a position to fund up to €1 billion investment in new and existing infrastructure assets primarily aimed at the commercial semi-State sector. This will be the first of a number of funds we intend to roll out under the umbrella of the strategic investment fund.

Where it makes sense and offers value for money, we will also be utilising public private partnerships, PPPs, to deliver public infrastructure alongside more traditional procurement. It must be stated that the private funding market for PPPs is currently very challenging. Bank credit is in short supply internationally and our sovereign debt situation presents its own difficulties. At my request, my officials are actively engaging with private institutional investors to see whether it might be possible to match our immediate funding requirements for projects with their long-term income stream needs. It does appear that there is an emerging interest in infrastructure investment among the pension fund industry, perhaps reflecting the volatility and poor returns from other forms of investment. A series of meetings is being organised with my Department to progress this matter. My officials are also in consultation with our European counterparts to explore best practice and similar initiatives undertaken in other jurisdictions. Indeed, I met last Thursday with representatives of the European Investment Bank, including its vice president, along with my colleague, the Minister, Deputy Noonan, to explore a variety of funding avenues that might prove possible.

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 up-front that the level of resources available to us does not match the investment of recent years, it remains the case that this plan sets out a significant tranche of investments over the next five years designed to facilitate economic growth and build on our social infrastructure.

Possible 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. I should not say completion as there are a few little gaps I am aware of that need to be addressed. This has aided businesses through much faster travel times. It helps to boost tourism by easier and faster accessibility to the regions. With the critical road infrastructure gap largely addressed, a shift in emphasis towards other areas of infrastructure is now possible.

Despite very difficult budgetary parameters the capital investment programme for 2012 to 2016 will amount to just under €17 billion. In 2012, the allocation will be €3.9 billion, reducing to €3.3 billion in 2013 and stabilising at €3.2 billion in the following three years. As I have previously stated, the profile of capital spend will now see an increasing share of what is a scarce resource allocated to the important areas of 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 this review commits major resources to the Department of Jobs, Enterprise and Innovation. While the need to address fiscal targets will require some reduction in funding to 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 at its highest. In other words, although the overall envelope of capital expenditure has shrunk, the percentage directed to direct supports to industry will be greater.

This will enable the IDA to deliver on its Horizon 2020 strategy, targeting the creation of 105,000 new jobs and 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 budgets will increase the number of high performance start-ups, supported to 95 in 2012, and includes a new fund of €10 million to attract new high performance start-ups.

While Science Foundation Ireland's, SFI, budget has been marginally reduced, 2012 will see SFI funded activities move into the applied research arena, which is something we were anxious to do. The €156 million allocation will enable Science Foundation Ireland to significantly enhance commercialisation opportunities emanating from SFI funded research, particularly through the enhancement of the Technology Innovation Development Award programme. A total of €27 million will be allocated for the programme for research in third level institutions and for research in the areas of energy, biosciences, arts, humanities, social sciences, medicine, pharmaceuticals, food and health.

Demographic pressures mean that we must provide for an additional 70,000 pupils in primary and secondary levels. I have, therefore, allocated €2.1 billion specifically for the delivery of an additional 40 schools - 20 at primary and 20 at post-primary level - and the expansion and-or renovation of a further 180 schools. This level of investment has squeezed out other possible investment in third level areas but we must prioritise and a sufficient number of school places for children has to come first.

In addition to investing in the national children's hospital, we will sustain capital investment in health care generally. The review maintains existing levels of health capital investment into the medium term - €390 million per year or €1,950 billion for the period 2012-2016. This investment will also allow for the replacement of the Central Mental Hospital, long promised but now to be delivered, and the continued rollout of the national project for radiation oncology ensuring we have full implementation of the national cancer strategy. We will also be assisting in our focus on primary health care as a key component of the Government's strategy to deliver local care and take pressure off the acute hospital sector.

In addition to the €5 billion already invested in improving water services in the past decade, environmental infrastructure continues to be a priority for Ireland. Consequently, alongside structural reforms to the water sector, water services investment will be a key focus of the capital programme I have published. From 2012 to 2016, over €1.6 billion of Exchequer resources will be committed to the water area. This will help ensure adequate capacity for economic development and meet pressing environmental targets.

I have allocated €500 million to the OPW and that includes funding for flood relief programmes in which, as recent events remind us, we need to invest significantly. In recent years the State has spent heavily to incentivise households and businesses to enhance energy efficiency. We will continue a level of support in the short term but given fiscal pressures, a transition to non-Exchequer based solutions involving energy suppliers is envisaged during the period of the plan.

As I have said, the motorway network may be practically complete but we are still allocating significant funding in the transport area. This will ensure the adequate maintenance of the national road network in order to protect the value of previous investments and target the improvement of specific road segments where there is a clear economic justification. On the public transport side, it has been necessary to put on hold some of the large scale projects that had been previously signalled.