Written answers

Thursday, 20 January 2022

Department of Public Expenditure and Reform

Capital Expenditure Programme

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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58. To ask the Minister for Public Expenditure and Reform the reforms that are planned to the spending code and the procurement rules for capital expenditure to ensure full expenditure of all capital allocated to different Departments which have underspent their allocations in the past few years; and if he will make a statement on the matter. [1359/22]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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As the Deputy will be aware, this Government has approved the allocation of record levels of capital expenditure to Departments over the last number of years and will continue to do so as demonstrated by the publication of multi-annual capital allocations out to 2025. 

The Public Spending Code (PSC) sets the value for money requirements and guidance for evaluating, planning and managing capital projects. Management and delivery of investment projects and public services within allocation is a key responsibility of every Department and Minister.

The update of the Public Spending Code in 2019 combined with lessons learned from domestic projects and international best practice highlighted the need for more structured scrutiny of major public investment projects, particularly in the areas of planned delivery, costings and risk. This is to ensure that Government is making decisions with a full picture of the proposal, its costs, risks and benefits.

In order to achieve this, my Department has introduced two key reforms:

- The introduction of an External Assurance Process (EAP) to provide independent project scrutiny at key decision stages. The EAP for major public capital projects (projects which cost in excess of €100m) will focus on issues such as cost, risk and ability to deliver, at two key points in the project lifecycle, Decision Gate 1 (Approval in Principle) and Decision Gate 2 (Pre-Tender Approval).

- A new Major Projects Advisory Group (MPAG) has been established to further strengthen project management. As a prerequisite to seeking Government approval for projects at the relevant decision gates, project proposals and external reviews will be scrutinised by the MPAG in advance of the decision to proceed. The new arrangements bring Ireland into line with leading international performers and meet a recommendation of the IMF’s Public Investment Management Assessment of Ireland.

- While there was an impact on building activity earlier last year due to Covid restrictions, activity in the sector ramped up significantly when restrictions were lifted in April.

- Capital expenditure drawdown can be lumpy in any year for any number of reasons such as delays in planning, delays in completion or even weather conditions.  As such, capital carryover is in place to assist Departments with the management of their capital spend across years to alleviate pressures and delays caused by timing issues and the impact of unexpected occurrences. This procedure is also designed to promote value-for-money in the use of capital funding, in particular by mitigating any incentive on the part of public bodies or Departments to spend any remaining capital allocation at end-year in an accelerated manner rather than surrender it to the Exchequer.

- I firmly believe that the capital carryover facility, as legislated for under Section 91 of the Finance Act, 2004 is the most appropriate provision to assist Departments in managing their capital allocations. A maximum of 10% of the original capital allocation is permitted to be carried over into the following year, which allows for the capital funding to be drawn down in a considered and deliberate manner that maximises public benefit.  This facility only applies to capital expenditure and not current expenditure.

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