I welcome the opportunity to address the House this afternoon on the mid-term evaluation of the national development plan published by the ESRI last week. Before commenting on the ESRI evaluation, I feel it would be useful to recall the objectives and content of the NDP.
When the plan was launched in November 1999 there was almost universal support for its objectives and strategies. The exhaustive analytical and consultative process, which was conducted by the Government and preceded the preparation of the plan, revealed a strong consensus on the key sectoral issues to be tackled and on the measures necessary to deal with these.
The NDP, as published, set out the following overriding objectives for investment: continuing sustainable national, economic and employment growth; consolidating and improving Ireland's international competitiveness; fostering balanced regional development; and promoting social inclusion. Consistent with these overall objectives, the plan provided for a most ambitious and unprecedented level of investment of almost €52 billion at 1999 prices across all sectoral areas pertaining to the economic and social development of the country. Key elements of the investment strategy were the continuation of stability-orientated macro-economic policies; a major investment programme in economic and social infrastructure; the promotion of education and employment training policies attuned to the needs of the labour market with a special focus on those most at risk of unemployment; and greatly accelerated investment programmes in key areas such as research and development and the provision of child care facilities.
Of the €52 billion provided, nearly €46 billion was from domestic sources, mainly the Exchequer. This included a massive acceleration in Exchequer investment in economic and social infrastructure. The EU contribution of almost €6 billion represented just 12% of the total funding of the plan, compared to 40% for the 1994-99 plan. A target of €2.5 billion was included for the public private partnership contribution to the funding of the infrastructure programme.
The plan was predicated on the continuation of stable macro-economic and budgetary policies. It was also based on the broadly positive outlook over the period then being forecast for the world economy as a whole. On budgetary policy, the NDP stated that the annual allocation and ultimately the overall commitment of the plan would have to be kept to a level that respected the public expenditure ceilings set by Government, take account of wider budgetary priorities and accord with the requirements of economic stability.
As Senators are aware, there has been a significant international economic downturn since the plan was launched, which has inevitably impacted on Ireland's growth. Nonetheless, as I will outline shortly, the Government has continued to accord priority to the NDP infrastructure programme, notwithstanding a much more difficult budgetary situation. The plan comprises seven operational programmes covering the key areas of sectoral investment pertaining to economic and social development. Reflecting their importance in terms of competitiveness and employment growth, the bulk of the investment was planned to be channelled through the economic and social infrastructure programme – that is €26 billion altogether – and the employment and human resource programme of €14.2 billion. The plan also contained, for the first time, two regional operational programmes mainly comprising locally based investment in the Border, midlands and west, BMW, and southern and eastern regions, respectively.
I wish to focus in particular on the Economic and Social Infrastructure Operational Programme. This is pivotal in terms of addressing the country's infrastructure deficit. Accordingly, the plan provided for massively accelerated Exchequer capital investment in key areas including roads, public transport, environmental protection, housing, health and education. To put this acceleration in perspective, the average annual Exchequer provision for these areas over the first three years of the plan was over €3.9 billion, which represents an increase of 42% over the corresponding 1999 provisions.
This reflects an Exchequer financial commitment over the period considerably in excess of that planned. For the OP as a whole, the Exchequer delivered about £1 billion more than originally planned over the first three years of the plan. In other words, notwithstanding the economic downturn since 2000, the Government more than honoured its financial commitment to the NDP infrastructure programme.
The result of this investment is visible on the ground throughout the country. There have been problems, articulated by the ESRI, which I will address but I strongly assert that by the end of 2006 the plan will have brought about a significant enhancement in our economic and social infrastructure.
The ESRI evaluation stems from the requirement under the EU Structural Funds regulations for a mid-term review of the performance of Structural Funds measures in each member state. In the case of Ireland, the Structural Funds comprise a small part of our national development plan. The Government, therefore, decided that the ESRI should evaluate the performance of the entire plan, not just the co-financed part.
Those who take time to read the evaluation will see that it is a broadly positive account of the performance to date of the plan. First, and crucially, the ESRI states that the overall strategy underlying the plan is as valid today as it was when it was first drawn up. On the overriding plan objectives which I outlined earlier, the ESRI states that the ". NDP has made significant progress towards its objectives of continuing sustainable national economic and employment growth and of consolidating and improving Ireland's economic competitiveness." Furthermore, the evaluation states that the NDP ". will have a sustainable positive effect on competitiveness and the productive capacity of the economy in the long term." As regards macro-economic impact, the evaluation states that "NDP expenditure over the period 2000-02 raised the level of GNP by over 7% above what it would have been in 2002." In the long run the level of GNP will be around 3% higher, representing a real rate of return on NDP investment of approximately 14% This is an exceptional economic performance by any standards, which proves that the NDP will leave a lasting legacy to the benefit of generations to come.
The evaluation is very positive about the impact of the plan on the other overarching NDP objectives of promoting social inclusion and more balanced regional development. It points out that investment in areas such as housing, child care, education and training has had a substantial effect in promoting social inclusion. The evaluation finds a mildly positive impact on the goal of better regional balance in economic development while urging better alignment between NDP investment and the national spatial strategy over the remainder of the plan. The ESRI evaluation gives a very positive endorsement of the impact of plan investment to date in terms of its macro-economic impact and achievement of key objectives.
The evaluation expresses concern about the impact of inflation on output and, in certain instances, the quality of programme and project management. The institute lays stress on the need for proper project appraisal and evaluation before public funds are allocated to programmes and projects. It also highlights the need to appraise the value of proposed changes in the scope and specification of programmes and projects before proceeding with any such changes. Apart from stressing the need for an optimal appraisal and evaluation regime, the ESRl report also puts forward a number of specific recommendations across various areas. These recommendations include a more rigorous pricing regime for the provision of infrastructure, guidance on investment priorities and improvements in the physical planning process.
The evaluation also sets out the recommended allocations by operational programme over the rest of the plan. These allocations reflect the ESRI priority of investment in infrastructure, human resources and RTDI, with lower priority recommended to several other areas, including grants made to industry, agriculture and fisheries. The recommended allocations are firmly grounded on the foundation of maintaining a stable macro-economic and fiscal climate as set out in the Government's stability programme published earlier this year. The ESRI affirms the original parameter that plan investment going forward must remain subject to the prevailing budgetary climate.
The ESRI evaluation, while purely advisory, will be an input into ongoing Government consideration of investment priorities. The evaluation is undoubtedly a comprehensive analysis of investment under the NDP. As Senators will appreciate, Government consideration of investment priorities must take account of a number of factors, including value for money and economic impact of the investment. The ESRI report contains much useful guidance on the latter. It is clear that the strategy, priorities and key objectives of the plan remain fully valid. The ESRI's conclusion that the plan is impacting so positively on the attainment of these objectives is welcome, as is its conclusion that the plan remains as relevant today as when launched in November 1999.
There will be no recasting of the plan's strategy and priorities. While it is the Government's intention to continue to progress implementation of the plan, it will be prepared to adapt investment priorities over the period to 2006, if necessary, in the light of the evolving situation and available resources. The clear message from the ESRI evaluation is that the Government has got it right in terms of prioritisation of resources. The allocation of resources for investment is an important issue and the Minister for Finance is already on record as favouring a multi-annual regime for capital investment. The Minister wants to bring about a situation where Departments and agencies can have reasonable certainty on the availability of capital resources over a number of years. Such an approach would undoubtedly facilitate better programme and project management.
The Department of Finance is at present revising the capital appraisal guidelines for public investment projects, which will issue shortly. The objective is to ensure the use by Departments and agencies of the best appraisal and evaluation techniques and optimal efficiency in the execution of major capital projects. The ultimate objective must be to ensure as far as possible that only the most economically justifiable projects receive priority and that all projects are executed on time and within budget. While the Department of Finance will issue guidance, however, it cannot and will not manage individual projects for Departments and agencies. The onus must remain with the latter as regards programme and project management.
I note the ESRI's recommendation that the Department of Finance should have some additional resources devoted to project and programme evaluation. Efforts in this area have been augmented in recent years through the expenditure review initiative and the extension of the remit of the CSF evaluation unit to cover all plan expenditure.
While the Department will consider the ESRI's proposal, the focus must be on improving evaluation and project management techniques at implementing and sanctioning agency level. Beneficial changes have already been made, notably in the National Roads Authority. Public private partnerships also have a role to play in better project delivery. Momentum has now been built up on PPPs in the roads programme and the Minister for Finance is determined to extend this to other areas in a way that yields greater value for money.
I acknowledge that the Border, midlands and western region is behind the indicative target for infrastructural investment set out in the plan as published. This reflects the fact that the infrastructure gridlock and bottlenecks are most severe in the southern and eastern region, especially in the greater Dublin area, and that priority has had to be accorded to major projects in this region. It might, however, be noted that there have been positive economic developments in the BMW region. Over the period 2000-03, employment growth in the BMW region was 3.3% as compared to 1.8% in the southern and eastern region. In addition, percentage population growth in both regions between 1996 and 2002 was almost identical. Thanks to the successful negotiating strategy of the Government at the 1999 Berlin Summit, the BMW region has Objective One status for the period 2000-06, despite its GDP per capita in 2000 being well in excess of the threshold for such status.
In its evaluation, the ESRI makes a number of recommendations which relate to different areas of ministerial responsibility. They are mostly matters for those Ministers, some of whom have commented on them. I will, however, briefly comment on aspects of the recommendations in the key area of transport. The evaluators question the level of specification for some of the key inter-urban routes and the appropriateness of toll-based private financing for some of these routes. There is some validity in the ESRI arguments as regards specification but it is my view that we should look at the investment on the major road routes in terms of the return over the long term. We must avoid regularly upgrading the same stretches of roads as traffic volumes increase. We have seen how toll-based private funding has delivered on the Dublin-Belfast road and what it will deliver via the Kilcock-Kinnegad project. There is potential to roll out much of the rest of the upgrade of the key routes between Dublin and the other gateway cities designated in the national spatial strategy in the same way.
On public transport some of the evaluation findings merit reflection. The report states:
The net impact to date of bus and rail investment in the Dublin area has been a substantial improvement in bus patronage, at modest cost, versus a disappointing passenger performance by rail, at substantial cost.
It also states with regard to urban fixed-line projects that international experience shows:
It is exceedingly rare for such projects to cost less than estimated by the project promoters. It is equally unusual for their schemes to deliver the passenger volumes promised.
These findings must be borne in mind on future decision-making on urban public transport.
The ESRI evaluation endorses the NDP strategy, stating that the plan is as relevant today as it was when launched. More importantly, it states that the plan is delivering on its objectives. We can and will do better in programme and project appraisal and evaluation. From the Government's viewpoint the evaluation gives us the reassurance and motivation to redouble our efforts on plan implementation so that when the final assessment is made after 2006, the same positive verdict will be given.