Patrick O'Donovan (Limerick County, Fine Gael) | Oireachtas source

I welcome the opportunity to address the Seanad in its new surroundings. Now that Senators are here, possession is nine tenths of the law. In fairness, it is a beautiful room and I compliment whoever organised it during the summer and everybody who worked on it. However long or short it is intended that the Seanad will located be here, I wish Senators the best of luck.

Included in A Programme for a Partnership Government is a commitment to increase public capital investment in the remaining period of the capital plan to 2021, to be allocated on the basis of the outcome of a review of the capital plan. In my contribution I will outline the process that has taken place as part of the mid-term review, the main themes and findings the analysis has produced and the next steps in developing a longer term ten-year national investment plan. I would also like to discuss the efficiency of capital investment in Ireland and how we can ensure value for money will be achieved from the investments made. This is an issue that is all too often forgotten but which is of critical importance in delivering the infrastructure our society and economy so badly needs.

The mid-term review of the capital plan was launched in January and conducted over the course of the year. Its objective was to provide a robust evidence base that would guide and inform the decisions made on capital allocations at budget time in October. It will also be an important input to the long-term ten-year national investment plan which will be finalised before the end of the year. It has now been published and provides a detailed evidence base for the allocation of the €4.1 billion of additional funding available in the period to 2021 and subsequently the new ten-year national investment plan in the light of the infrastructural deficits identified through the analysis undertaken in the review.

The evidence base for the review includes detailed submissions by Departments and offices, an extensive public consultation process and an infrastructure capacity and demand analysis completed by the Irish Government Economic and Evaluation Service, IGEES, in the Department of Public Expenditure and Reform. It is important to note that in terms of the conduct of the review, it was a matter, in the first instance, for each Department to identify its sectoral priorities and specific projects. Departmental submissions were received by the Department of Public Expenditure and Reform earlier this year and these recommendations will play an important role in ensuring the additional funding will be aligned with the relevant sectoral priorities. The review examines a number of key issues relating to public capital investment in Ireland such as the rationale and objectives of public capital investment, the efficiency of public capital investment and steady State funding and the sustainability of increased public capital investment.

Based on all of the evidence and analysis, the review of the capital plan identified a number of key sectoral infrastructural priorities, including, in transport, the maintenance and upgrading of the road network, as well as public transport; in education, higher education and the schools building programme; in health, subject to further analysis, the totality of health capacity and infrastructure; and, in housing, on the basis of the review of the action plan for housing and homelessness. The Government will make final decisions on the allocation of the additional capital resources in advance of publication of the Estimates for 2018.

Following the allocation of funding for increased capital investment in the 2018 Estimates, a new ten-year national investment plan will be published before the end of the year for the period 2018 to 2027. The key priority for the ten-year plan will be to secure the coherence of long-term and strategic sectoral objectives with the planned new spatial configuration in the national planning framework. Drawing on key strategic sectoral objectives outlined by Departments and in line with international precedents, the longer term focus of over five years will be largely thematic. The ten-year national investment plan will also include proposals for structural reform of public investment in the planning, selection and delivery of capital projects. It will be informed by the public investment management assessment, PIMA, undertaken by the International Monetary Fund, IMF, in July 2017. An IMF PIMA evaluates the design and effectiveness of the institutions that shape decision-making at the three key stages of the public investment cycle - planning investment, allocating investment to the right sectors and implementing investment. All of this work being carried out by the Department of Public Expenditure and Reform will ensure the additional capital resources available will be targeted at the priority public capital infrastructure required to support Ireland’s medium-term growth potential and underpin social cohesion.

Based on previous discussions, I expect all those present to agree that increasing capital investment in public infrastructure in the coming years is crucial for Ireland’s future development. It is, therefore, a moot point to a certain extent. However, simply increasing capital expenditure will not, in and of itself, result in all of the infrastructure deficits being addressed in the short term. Clearly, there are constraints on the economy’s capacity to deliver capital infrastructure in a given year. Increasing the efficiency of public investment will allow us to deliver greater levels of infrastructure. It is critical that we plan and prioritise our investment in a sustainable manner based on robust research and evidence, something that has not always happened in the past. In the period to 2008, capital investment was ramped up to unprecedented levels. Research from the ESRI has called into question the efficiency of the investment in that period and whether value for money was achieved, given the overheating and price inflation in the construction sector. Since that time the Office for Government Procurement has been established, the Government’s economic and evaluation service has been established and the public spending code has been developed. The recent publication of a capital projects tracker on the website of the Department of Public Expenditure and Reform, alongside the capital review, will also help to bring to the public greater transparency and certainty on the major projects planned for delivery. Furthermore, the Government’s intention to develop a long-term approach to capital investment will provide clarity, confidence and certainty for the construction sector to plan for providing the capacity and capability required to deliver the infrastructure on a value for money basis in the coming years.

It is very important in examining capital investment that we shift the debate away from an exclusive focus on individual projects. To make better use of the resources available for public capital investment we must support the continued development of a culture of evaluation in which projects will be subject to a full project appraisal consistent with the requirements outlined in the public spending code. This was a key theme in the submission made by the Committee on Budgetary Oversight on the capital review. The mid-term review of the capital plan was a detailed and comprehensive process. It provides us with an evidence base to debate and, I hope, come to some conclusions on what sectors of investment merit prioritisation in allocating the additional funding available.

The review of the capital plan also highlights some key themes that will closely inform and be incorporated into the analysis leading to the finalisation of the new ten-year national investment plan. A discussion of these themes may also be beneficial. They include confirmation of the central role of public capital investment in underpinning the economy’s long-term growth potential and addressing overheating risks, as well as supporting social progress; the need to align public capital investment priorities with the changing demographic profile; the critical importance of public capital infrastructure in meeting the essential requirement for balanced regional growth and promoting the societal transformation required to achieve climate action objectives; the mechanisms through which public investment can strengthen the economy’s resilience to major risks such as Brexit; the central importance of robust mechanisms to support the efficiency public capital investment to ensure the public infrastructure and services delivered through capital expenditure will be secured on a value for money basis; and the strong business case for ensuring public capital spending will be balanced between new projects and maintaining the quality and capacity of existing public capital infrastructure.

As a Government, we are very interested in listening to the perspective of all Senators here today about these critically important issues. I look forward to a constructive session ahead.