Written answers

Thursday, 24 November 2016

Department of Public Expenditure and Reform

Capital Expenditure Programme

Photo of Mick WallaceMick Wallace (Wexford, Independent)
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15. To ask the Minister for Public Expenditure and Reform if, in view of the significant cuts to capital expenditure during the financial crisis, he is satisfied that the government's Building on Recovery: Infrastructure and Capital Investment 2016-2021 plan, which aims at a capital expenditure rate of 2.2% of GDP by 2021, is ambitious enough, particularly in view of the advice of many economic analysts (details supplied) that capital investment should be at least double that; and if he will make a statement on the matter. [36565/16]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Capital Plan published last year set out a six year framework for infrastructural investment in Ireland. The scale and profile of the Exchequer component of the Plan was developed with reference to the Government's medium term economic growth forecasts and assessment of Ireland's fiscal targets at the time.  

Since then, the current Government has made clear that the existing Capital Plan is the starting point for increased investment in priority areas into the future.  This is demonstrated by the additional €5.14 billion now committed to capital investment over the period of the Capital Plan.  I have recently announced the commencement of a Review of the Plan for the allocation of these substantial additional  resources for capital investment to Government priorities. 

As the Deputy has indicated, Exchequer capital expenditure will amount to 2.2% of GDP in 2021, or 2.7% of GNP, a better metric for the Irish economy. However, when the State Owned Sector investment of €14½ billion is included, along with a third phase of PPPs, total state backed investment will reach 3.7% of GNP in 2021.

While representing capital investment as a percentage of GDP tends to be used as a means to make international comparisons on the topic, in Ireland's case this ratio may not give an accurate reflection of the level of investment taking place. Given the exceptional nature of recent increases in GDP and GNP, we must be very cautious in how and when we use such figures and, if necessary, use additional indicators, such as capital expenditure as a percentage of total expenditure. Using that measure, Gross Voted Capital expenditure is set to increase to over 11% of Total Voted Expenditure by 2021, or almost 75% higher than in 2016.  

This Government is committed to increased capital investment in the coming years to underpin the economy's medium-term growth potential and continued employment creation.  The funding of our capital investment plans must be securely based on sustainable economic growth and must be consistent with the requirement of responsible fiscal policy.  This is the clear lesson from the unsustainable expenditure policies that preceded our fiscal collapse.  It also reinforces the importance of ensuring that we maintain a strict focus on securing value-for-money for the Exchequer rather than see the State's investment eroded by tender price inflation and by projects that do not meet cost-benefit tests.

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