Dáil Éireann Debate, Thursday - 26 October 2023
5. Deputy Rose Conway-Walsh asked the Minister for Public Expenditure, National Development Plan Delivery and Reform to outline the estimated level of capital expenditure as a percentage of GNI* for 2023 and 2024 respectively; how this compares with estimates in the national development plan; and if he will make a statement on the matter. [47039/23]
View answerWill the Minister outline the estimated level of capital expenditure as a percentage of GNI* for 2023 and 2024 respectively and how this compares with estimates in the national development plan, NDP? The latter is a multi-annual plan and, as such, the Minister will agree that inflation, economic growth and GDP should be taken into account. It is important that we have effective and transparent measures in respect of capital investment, particularly during times of high inflation.
The NDP sets out an ambitious programme for public investment in Ireland of €165 billion. This expenditure will be pivotal in delivering the vital infrastructure we need to support our future climate, social and economic requirements. In 2023 and 2024, over €12 billion and €13 billion, respectively, will be made available from the Exchequer for investment in public capital projects. This funding will provide more schools, homes, hospitals, road and public transport projects. To put this in context, capital expenditure in 2024 will be almost €8.6 billion or 189% higher than the €4.5 billion allocated in 2017. With the context set, I will answer the Deputy's question as to what that means. It means that estimated capital expenditure as a percentage of GNI* is anticipated to be 4.1% in 2023 and 4.3% in 2024. These rates are below the projections of 4.9% and 5.1% set out in the NDP in light of the very strong performance of the economy in the recent past, which has led to strong growth in GNI* since the publication of the NDP in 2021.
Our investment is still well above the recent EU average of 3% of national income. In budget 2024, I allocated an additional €900 million over the 2023 allocation for essential investment. This will bring total core capital investment to €12.8 billion, an 8% increase, which is in line with our NDP targets. As outlined in the summer economic statement, a further €250 million will be made available for 2024 from critical infrastructure projects. This will be funded from windfall Exchequer receipts.
As the Minister has said, the NDP was reviewed and the targets for capital investment as a percentage of GNI* were set in 2021. The revised NDP also set out departmental capital ceilings for 2025. In budget 2024, we saw the Government stay within those NDP ceilings. The 2021 targets set for 2023 and 2024 were 4.9% and 5.1% respectively, as the Minister has said. The Department now estimates that the rates will be 4.1% and 4.3% so there is a 0.8% shortfall in both years, 15% behind profile for both years. By my calculations, this is a shortfall of €2.3 billion or €2.4 billion in each year. Does this not mean that the Government is far behind on capital investment in real terms?
Why was budget 2024 not used as an opportunity to address the shortfall in capital investment? We saw no additional capital investment in housing despite the ongoing housing crisis and we had issues earlier in the year with capital for education.
There has been an increase in capital investment but the increase in capital investment is in line with the indications we gave for the national development plan a few years ago. The reason we make decisions years in advance to increase investment is to give our economy the ability to organise itself so that it is able to build and transform this higher level of capital spend into output, into new schools and new homes being built, and into the national broadband plan being expanded.
On the point the Deputy has made on our capital expenditure now having a lower share GNI* versus what we originally estimated, I am also receiving a great deal of advice from my Department and from institutions that spending any more money on capital investment beyond that which I have already allocated runs the risk of inflation and adding domestic inflation to the European and global inflation difficulty we are facing here in Ireland. That warning is also there.
I thank the Minister and I understand that. We had issues earlier this year, however, with capital projects in education where the Government was forced to row back on the initial plans and to scrap a number of projects because the expenditure ceiling had been reached in inflation. This caused very significant distress to schools and to their communities who in many instances had been waiting years and had gone through multiple hoops to get projects to go ahead. This highlighted the shortcomings of the Government capital investment when it is not responsive to inflation.
My question, therefore, is when will we now reach the 5.1% of GNI* expenditure which should have been reached in 2024? It seems like we are not meeting the levels of ambition set out in the national development plan when we look at the percentage of GNI*. That is the measurement we should be using. Is the Minister committed to reaching a 1.5% of GNI* in capital projects and when will that happen?
Of course I am committed to how we can maintain and grow the capital investment in our economy, but I do not have a guiding anchor of what it should be as a share of GNI* that supersedes the fact that I had to make decisions regarding how we allocate money that is available to us. The first ordered decision is how much money is available to the country and whether we are going to reduce our surplus to increase more in capital investment. That is the first ordered decision and it is a decision made in conjunction with the Minister for Finance. We cannot reach decisions regarding our capital investment as a share of GNI* without first considering how much money is available to us and how appropriate it is to spend that money in our economy. Having that as a target which supersedes everything else, I believe, is risky. This House, this Government and perhaps the next government will get to a point where our GNI* is not as positive as it is today. If we are going to have a target of investment as a share of GNI*, that opens up the risk of capital investment falling, which is the last thing I believe we should be doing.
