I am pleased to attend the meeting of the Committee on Budget Oversight today in response to the committee’s request to provide clarification on the national broadband plan and advices received from my Department with regard to the development plan and funding for other infrastructure projects; and the future budgetary impact of the national broadband plan, its potential impact on the overall fiscal position, and measures to provide oversight and control over budget costs.
I note from the agenda items listed for discussion today that the committee appreciates the differing roles and responsibilities of my Department and the Department of Communications, Climate Action and Environment with regard to the national broadband plan. However, it would be worthwhile to recap on these differing roles and responsibilities to help inform our discussion this afternoon. When it comes to capital spending and the procurement of individual capital projects, in accordance with Government policy and in compliance with the public spending code, I can summarise the position as follows. I am responsible for setting the overall five-year multi-annual capital expenditure ceilings and for allocating these resources across different Departments. My Department is also subsequently responsible for monitoring expenditure every month at departmental level against these agreed ceilings. Decisions on how and where these allocations are then invested by individual Departments are a matter in the first instance for the relevant Minister, in line with the conditions of delegated sanction specified by my Department.
My Department maintains the national frameworks within which Departments operate and make their decisions to ensure appropriate accounting for, and value for money of, public expenditure. These frameworks include the public financial procedures, the public spending code, and the national public procurement guidelines. The management and delivery of individual projects, within allocation and in accordance with the relevant national frameworks such as the public spending code, public financial procedures, etc., is primarily the responsibility of the relevant individually responsible Minister.
The public spending code requires Departments and agencies to undertake an appropriate appraisal, such as cost-benefit analysis or cost-effectiveness analysis, on all expenditure proposals with an estimated value in excess of €20 million. This requires Departments to submit their appraisals for such projects to my Department for technical review with regard to the methodology used and to ensure compliance with the requirements of the public spending code. Departments are further required under the public spending code to update project appraisals or cost-benefit analyses continually as the procurement process evolves and as actual tender costs, as opposed to cost estimates, become available. My Department may be consulted to review such updated proposals technically, if necessary. While my Department is not involved in the assessment of the tenders for individual projects, if it emerges that the cost of a project is not capable of being met within the agreed multi-annual capital allocation of the relevant procuring Department, then that Department must engage with my Department to explore how to proceed with regard to the project.
In the specific case of the national broadband plan, the Department of Communications, Climate Action and Environment is the sponsoring agency and the Government is the final sanctioning authority. Where the Government is the sanctioning authority, the public spending code makes it clear that the day-to-day oversight functions of the sanctioning authority revert to the relevant line Department, in this case the Department of Communications, Climate Action and Environment. The Government is then involved at major decision points. My Department has engaged with the Department of Communications, Climate Action and Environment throughout the process with regard to the economic appraisal of the national broadband plan. The purpose of that engagement was to review technically the economic appraisal to ensure that the methodology used was robust and in compliance with the requirements of the public spending code. There has also been ongoing engagement between the Department of Communications, Climate Action and Environment and my Department in respect of the cost and affordability of the project, in particular once it emerged that the cost of the project was not capable of being funded within the allocation that had been made for the project in the national development plan.
I will now turn to the three specific issues that the committee has tabled for discussion today. In terms of the impact on the national development plan, NDP, and other infrastructure projects, I have already indicated that I intend to provide the additional capital required to fund the additional cost of proceeding with the project. This means that the decision to approve the appointment of the preferred bidder will have no repercussions for other planned projects within the national development plan. No other projects will be delayed or rescheduled and no other changes will be made to the capital allocations for other projects, such as those set out in the national development plan, as a consequence of the Government’s decision to proceed with the broadband plan.
In terms of the future budgetary impact, the current indications are that the additional requirements will be approximately €200 million in 2021 and 2022, rising to €300 million in 2023. This will result in a disimprovement in the general Government balance of approximately 0.1% of both GDP and GNI* annually compared with the projections published as part of the stability programme update. As the committee will be aware, projections for general government revenue and expenditure beyond 2023 have not yet been compiled by the Department of Finance.
Finally, regarding the risk associated with the project, I accept that there is risk associated with the decision the Government has made. Rolling out a form of technology like this to 1 million of our citizens who live across the length and breadth of our country is an inherently complex activity and therefore one which must involve risk. If it was not complex and if there was no risk involved, the private sector would already have delivered this. While I accept that there is complexity and risk involved in the decision that has been taken, I believe that, on balance, this is the right course of action to take.