Vol. 573 No. 5
2 Ms Burton asked the Minister for Finance if he will make a statement on the mid-term review of the national development plan, carried out by the ESRI; and if changes are planned to the evaluation, planning and management of projects as a result of the review. [25933/03]
3 Ms Harkin asked the Minister for Finance if the NDP will be refocused to deliver more equitable treatment for the BMW region during the remainder of the NDP programme to end 2006. [25931/03]
I propose to take Questions Nos. 2 and 3 together.
I have noted the broadly positive conclusions of the ESRI evaluation of the national development plan, NDP, regarding achievement of strategic objectives and its macro-economic impact. The evaluation concludes that the strategy underpinning the plan is as valid today as it was when the plan was launched. As regards plan objectives, the evaluation indicates 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. It further concludes that the plan will have a sustainable positive effect on the productive capacity of the economy in the long-term.
On macro-economic impact, the ESRI report finds that NDP expenditure over the period between 2000 and 2002 raised the level of GNP by over 7% above what it would have been in 2002, and in the long run the level of GNP will be about 3% higher. That represents a real rate of return on NDP investment of about 14%. That is an exceptional economic performance by any standards.
At sectoral level, I note the prioritisation the ESRI accords to infrastructural investment. That the Government concurs with this prioritisation is shown by the fact that, over the first four years of the plan, the Exchequer has provided almost €1 billion more for economic and social infrastructure than was originally committed. I note the ESRI endorsement of the relative priority the Government has accorded to areas such as education and training, RTDI and child care. Although the ESRI evaluation is purely advisory, it will be an input into the Government's ongoing consideration of its investment priorities. As Deputies will appreciate, the Government's consideration of such priorities has to take account of a number of factors, including value for money and the economic impact of investment. The ESRI report contains much useful guidance in the latter regard.
I accept that the evaluation contains criticisms of cost over-runs and deficient management of infrastructural projects and programmes. It points to the need to properly evaluate projects. I accept that we must strive to ensure the best value for money in the planning and evaluation of infrastructural projects. My Department is revising the capital appraisal guidelines for public sector capital projects and the revised guidelines will be issued shortly to Departments and public agencies. The existing guidelines, which remain in place, set out guidance in relation to the evaluation, planning and execution of capital projects.
I stress that the onus for the proper appraisal and management of capital projects rests with the implementing agencies. In the context of the revised guidelines and otherwise, my Department will strive to impress on Departments and implementing agencies the need for best practice in the evaluation and execution of capital projects. I favour, in principle, a multi-annual system of financial envelopes for capital investment, recommended by the ESRI. This would facilitate more efficient project and programme management by giving more certainty in respect of the availability of resources over a number of years.
I have also been asked about the impact of the plan on regional development. I note the ESRI's conclusion that regional imbalances would probably be greater than they are today if it were not for the policies implemented under the national development plan. I accept that the BMW region is behind the indicative target for infrastructural investment, as set out in the published plan. This reflects the fact that infrastructure gridlock and bottlenecks are most severe in the southern and eastern region, especially in the greater Dublin area. Priority has had to be accorded to major projects in the region for this reason.
I am glad that the Minister acknowledges the deficiencies pointed out to the Government in such trenchant terms by the ESRI. Can he explain to the House the reason the national development plan has failed to upgrade the country's competitive position? We have heard that Ireland has dropped from 23rd to 30th position on the World Economic Forum's competitiveness index. We are almost at the bottom of the table. The national plan should be providing improved roads and communications and for better research and development. Is the Minister aware of the despair in universities and colleges which want such institutions to be the driving force behind the knowledge economy of the future? Is the Government's approach to cuts so short-sighted that it is putting at risk private funding for research at universities and other third level institutions such as that offered by Mr. Chuck Feeney's Atlantic Philanthropies?
In his sixth year in office can the Minister excuse his failure to put in place a single public infrastructural project which could obtain funding from the national pensions reserve fund? Can he explain how the PPP process has abjectly lost the confidence of the private sector? We have heard over several months that the process is his favourite means of delivering infrastructure. Mr. Michael Somers of the National Treasury Management Agency has pointed out on many occasions that the Government can borrow at the rate of 4.5%, whereas banks and PPPs want a return of 14% or 15%. Despite the offer from the Government, the private sector has lost hope in respect of PPP initiatives.
Does the Minister agree that the national development plan seems doomed to failure under almost every heading? This argument seems particularly valid when one considers that the Minister for Transport, Deputy Brennan, the Minister for the Environment, Heritage and Local Government, Deputy Cullen, the Minister for Health and Children, Deputy Martin, and the Minister for Communications, Marine and Natural Resources, Deputy Dermot Ahern, have criticised the review. Is the Minister saying he accepts the review? Does he side with the Taoiseach who said there were good and bad elements to it? Does he side with his four ministerial colleagues who have trenchantly rejected the review's detailed criticism of their stewardship of their Departments and the Minister's stewardship of the economy? Can he answer these questions?
Does the Deputy agree with her colleague, Deputy O'Sullivan, who criticised the ESRI report's recommendations in respect of education? There is nothing unusual about the fact that Ministers have been critical of recommendations made about specific policy areas. I have said the ESRI evaluation is worthwhile and useful as a basis for the Government's future consideration of attitudes. I have said I take on board the criticism of the ESRI which wants the Government to take on board some policy initiatives that no Government would be willing to adopt. I do not think that a Labour Party Government would accept some of the ESRI's recommendations, for example, that mortgage interest relief and film relief be abolished, that congestion charges and road tolls be introduced and that the amount spent on capital projects such as hospitals be reduced. I would be interested to hear the Labour Party advocate its support for these proposals.
Fianna Fáil once abolished car tax.
My Cabinet colleagues have mentioned some of the recommendations that will not be adopted but nobody in the House would advocate their adoption. When I mentioned the index produced by the World Economic Forum in my response to the previous question, I argued that a certain element of caution should apply when assessing the forum's conclusions. I remind the House that over 100 countries are assessed by the World Economic Forum. It is not the case that just 20 or 30 are involved.
Deputy Burton mentioned areas such as third level education. The amount being spent by this Administration in terms of capital expenditure is about 5% of gross national product, twice that in other European countries. One is seeing and will continue to see major improvements in the country's infrastructure. Anyone who has driven to Belfast in recent months will have noticed the great improvements made in the road as far as Dundalk. One can see major infrastructural projects in all parts of the country.
I have pointed out on many occasions that there is nothing to prevent the national pensions reserve fund from investing in any project, provided that the commissioners are satisfied as to the potential of such an investment. Some public private partnerships such as the Kilcock-Kinnegad bypass in County Kildare are being undertaken. The Deputy also mentioned the rates of borrowing for PPPs. With every other Minister for Finance who has ever been in this House, I know that the State will always be able to borrow at a lower rate than anybody else. This is true regardless of the size of the institution or company involved. A state grounded on sound economic principles will always be able to borrow at a lower level. There are other reasons the State should pursue PPPs, as I have alluded to on many occasions.
It is interesting that the Minister answered Questions Nos. 2 and 3 together, despite the fact that the thrust of the questions is quite different. I accept that the last part of his reply addressed the question that I posed to him. The ESRI report states there has been a mild positive impact on balanced regional development. In other words, matters will get worse if nothing is done – big deal. Is the Minister aware that one of the four stated objectives of the national development plan was the achievement of balanced regional development? He has informed the House today that expenditure on national primary roads in the BMW region is a little behind the stated target. It is not a "little" behind, however. Is the Minister not aware that expenditure on national primary roads in the BMW region is almost 50% behind? Expenditure on such roads in the southern and eastern region is almost 50% ahead of schedule.
Is the Minister not aware that the pattern of the last national development plan is being continued? The gap is widening. Does he not accept that unless major strategic changes are made to the way we dole out resources to the BMW region under the national development plan, the gap will continue to widen? Is he not aware that the GDP figures concerning the BMW region and the southern and eastern region show that the gap is widening and that the employment figures of IDA Ireland and Enterprise Ireland show that from 1996 to 2002, 50,000 extra jobs were created in the south and east while only 4,000 were created in the BMW region?
A question, please.
If the Minister does not reprioritise spending in the national development plan, the Minister's stated objective of achieving balanced regional development will never be achieved.
I accept that national development plan expenditure is behind the indicative target for the BMW region. However, the previous Fianna Fáil-Progressive Democrats Administration decided to divide the country into two regions. This was not accepted by all parties in the House but it was a good decision. Its purpose was to attract a higher level of EU funding for the Objective One region, which is the BMW region. It has worked well.
Much of the money spent in recent years has been spent in the southern and eastern regions, on projects such as the port tunnel and the roads in the eastern region. Over the period of the plan, I hope the spending on the BMW region will reach the targets set out in the plan. However, the ESRI stated in its evaluation – the Deputy alluded to this – that notwithstanding the imbalance in spending, the imbalance would have been greater without investment in the plan.
Furthermore, in the period 2000 to 2003, there have been some very positive economic indicators concerning the balance between the BMW and the southern and eastern region. For example, employment growth in the BMW region was double that of the southern and eastern region in the period 2000 to 2003. The latest figures for 2000 show that the BMW region has converged towards the EU average per capita GVA figure of 82%. Unemployment in the BMW region is only 1% higher than in the southern and eastern region, notwithstanding historical and structural differences. There was virtual parity in population growth rates in the BMW and southern and eastern regions in the period 1996 to 2006. Therefore, while I accept we have not been able to achieve the indicative investment targets in the first two years of the plan, as pointed out in the ESRI evaluation, I hope we will be able to redress this in the coming years.
