Dáil Éireann Debate, Wednesday - 19 October 2016
22. Deputy Thomas P. Broughan asked the Minister for Public Expenditure and Reform the percentage of GDP the capital programme for 2017 represents, including increases for housing, health, education and transport; his views on the fact that capital expenditure is barely level with or below the generally agreed depreciation rate for the capital assets of Ireland; and if he will make a statement on the matter. [30776/16]
View answerThis is a question we put to the Minister very strongly at the Committee on Budgetary Oversight. Projections to 2021 indicate that capital spending is barely keeping pace with depreciation. Professor Tom McDonnell of the Nevin Economic Research Institute, NERI, made that point to us most strongly. In fact, the figures he gave us showed that they are below normal accounting depreciation rates. That is a matter of grave concern. We have talked about our infrastructure, including metro north and having a proper road network for the north west and west as well as all the other capital needs of the country, especially housing. Is it not the case that the Minister needs to ramp up capital spending?
As to where we are for this year and next year, following the recent revision to our national income, or GDP, figures, the Department of Finance expects Ireland's nominal gross domestic product for 2017 to be approximately €275 billion.
Therefore, the current State-backed investment plans for next year will stand at 2.5% of nominal gross domestic product and 3.1% of nominal gross national product.
The Deputy's question was where they stand versus other countries. I have acknowledged to the Deputy and the budget oversight committee that we need to rebuild our capital expenditure in light of the growth that has occurred in our economy. We can see the pressure that growth has created in existing infrastructure, whether that is in skills, housing or transport. We also need to build it because if we do not, we will not be able to maintain or accelerate current levels of growth. That is the reason we will commence a review of the current capital plan next year and have it complete by the summer. It is also the reason I aim to allocate an additional €5 billion on top of the €27 billion available for capital investment. My expectation is that at the end of that capital plan, we will bring up for the final two years our investment in capital infrastructure as a percentage of our national income into line with countries with which we compete. The real goal in value will be to keep that level of capital investment flat for years afterwards, so it neither peaks nor goes into a trough from that level and it keeps a steady pace of investment in our schools, roads and other forms of infrastructure, such as metro north.
I mentioned housing and we need to ramp up the construction of social housing by at least 10,000 units per year. In the alternative budget that I submitted, I spoke about having an additional €1 billion for housing this year and every year until 2021 or until we get rid of the horrendous experiences being suffered by people in the city tonight. With regard to transport, we speak of metro north and we were meant to be hopping on metro north in 2026. Perhaps we could do with it in 2021 or 2022, particularly with the expansion of the airport and so on. With education and health, we are just keeping up with demographics, so we need major development.
We heard some worrying aspects of this at the budget committee meetings. The rainy day fund is a great idea and we had it before with McCreevy's money but, unfortunately, it went into the banks. It seems we will have a rainy day fund and yet we are skimping on investment. In particular, there is a new debt figure formulated by the Minister's colleague, the Minister for Finance, Deputy Noonan, when he said we must hit the 45% debt-to-GDP ratio. Why on earth would we do that when we desperately need housing, transport and so on?
With regard to current levels of investment, we are looking to do more than just keep up with demographics, particularly in education and health. One of the benefits of the new approach that has been adopted in how we class government expenditure is that we set aside the portion due for demographics. I have always acknowledged that we must hire a certain number of teachers just to maintain class sizes as they are due to the effect of demographics. We recognised that in what we publish, and the same applies in health issues and our social welfare system. We want to increase this in the way I have outlined to the Deputy, although this depends on our economy growing at a moderate rate across the next five years.
With regard to the debt figure set by the Minister for Finance, Deputy Noonan, the objective is to move to that debt figure across the 2020s. I support the objective as it is to precisely create the kind of buffer zone in our national debt so that if we get hit again by external forces, as happened in recent years, we will have health within our national finances to allow us to respond in a way that we have not been able to in recent years.
