Robbie Gallagher (Fianna Fail) | Oireachtas source

I welcome the Minister of State to the House. The Construction Instruction Federation has highlighted the considerable impact hyperinflation is having across the building industry. The Society of Chartered Surveyors Ireland has shown that the annual rate of construction inflation was 13.4% during 2021. Increasing materials and energy prices have been the driving forces behind the increasing costs since early 2021. When there appeared to be a brief decrease in inflation at the end of last year, the war in Ukraine swiftly caused prices to soar again and it is believed the prices will continue to rise throughout this year.

A multitude of issues, including the pandemic, high demand, supply shortages, delivery delays, the long-lasting impacts of Brexit and the war, have led to an increase in materials costs, a shortage of materials and a labour shortage for the construction industry. Ultimately, such inflation increases the possibility of contractors being unable to tender for projects and even in some cases becoming insolvent.

There is a case to be made for an effective price variation clause to be included in all new public works contracts and a mechanism to be applied retrospectively for projects that are under way. No one who signed a contract two or three years ago could have foreseen the level of cost inflation that has taken place in the interim. There are implications for projects already under construction. It may become uneconomical for some contractors involved to complete their work without becoming insolvent. There is a possibility that contractors will be unwilling to tender for public contracts because of this issue.

I will give a few examples of price inflation in construction.The cost of a tonne of rolled steel has risen to €1,500, which is up by €600 since mid-February, an increase of 65%. There has been a 50% rise in the price of rebar, which has jumped from €900 to €1,350 per tonne in just the last four weeks. The cost of copper cable has increased by 31% while certain types of steel are simply no longer available. The cost of some deliveries, particularly of electronic controls and lighting equipment, has increased by up to 100%. These extra costs may have serious implications for future and current public works projects including the national development plan and Housing for All. With regard to the national retrofit scheme, it is estimated that the cost of insulation products has increased by 35% in recent times. That puts a question mark over that entire project.

Apart from the Government-backed schemes under Housing for All, the retrofit scheme and the national development plan, inflation in the cost of building materials has the potential to stall many one-off housing projects, as I mentioned in the House last week. Builders seem to have reached a point at which their budgets simply cannot go any further. Housing associations also need help. They need a bit of flexibility to ensure that contracts are fulfilled and much-needed housing delivered.

I understand the importance of protecting taxpayers' money. It is public money and the Minister of State and the Government have a duty to ensure it is not wasted. However, perhaps some flexibility could be shown as a result of the €2 billion capital underspend in 2020 and 2021 that arose because of the pandemic. That might allow for some space to manoeuvre on price variation clauses. It is clear that something needs to be done in this regard. It is not a question of whether we can afford to do this, but of whether we can afford not to.