Anthony Lawlor (Kildare North, Fine Gael)
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31. To ask the Minister for Public Expenditure and Reform if analyses are done on the economic benefits of capital projects versus the interest charged on Government borrowings over time; and if he will make a statement on the matter. [26118/15]

Brendan Howlin (Wexford, Labour)
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The level of Government capital investment is decided in the context of the Government's fiscal targets, the fiscal outlook, and the Government's policies on taxation/revenue and on other areas of expenditure.  In recent years, fiscal policy has been to reduce the General Government Deficit in line with a series of targets, and to return the public finances to a sustainable path.  Progress has been strong; the deficit is on track to fall below 3% by end 2015, thus signalling Ireland's exit from the Excessive Deficit Procedure.  Thereafter, the overall scale of General Government expenditure-including Exchequer capital investment-will be framed in the context of the preventive arm of the Stability and Growth Pact.

The Public Spending Code sets out the economic appraisal requirements for new current and capital expenditure proposals.  Departments/Agencies proposing the expenditure are generally responsible for undertaking the required appraisal for each new spending proposal or project. It should be carried out before Exchequer resources are committed.

Economic appraisal involves a series of steps from objective definition and options exploration through to selection of the preferred option.  For significant expenditure proposals, it is important to consider overall Value for Money by quantifying, monetising and comparing all relevant costs and benefits for a range of options. The aim is to determine whether the overall economic and social impacts for society outweigh the direct and indirect costs. Reliable estimation of all the costs associated with completing the project is key e.g. construction, operations, maintenance.

To account for the fact that money in the future is worth less than money now, an economic discount rate is used to convert future costs and benefits to present values. There are different ways of determining the discount rate for economic appraisal. In Ireland, the social rate of time preference has been the main method used in recent years.

Financial appraisal, as distinct from economic appraisal, focuses specifically on the project financial flows which impact on the public sector organisation and/or the Exchequer. For example, this form of analysis is used in the financial comparison tests for Public Private Partnership projects and the discounting of cashflows in these evaluations is informed by the cost of Government borrowing.