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Capital Programme Expenditure

Dáil Éireann Debate, Wednesday - 9 October 2013

Wednesday, 9 October 2013

Ceisteanna (4)

Seán Fleming

Ceist:

4. Deputy Sean Fleming asked the Minister for Public Expenditure and Reform the reason the Government is using under spending of the capital budget to provide a safety net for the overall budgetary position for 2013; his views on whether this is costing jobs in the current year; and if he will make a statement on the matter. [42569/13]

Amharc ar fhreagra

Freagraí ó Béal (5 píosaí cainte)

For 2013, the Government set a general Government deficit target of 7.5% of GDP and the expenditure ceilings underpinning the budget were set on this basis. It is too early to estimate the end of year outturn in regard to the 2013 current and capital expenditure allocations. As I indicated, the end of September Exchequer returns are on target.

While net capital expenditure was 17% below profile at the end of September, information supplied to me by Departments indicates that the majority of their remaining capital budgets will be spent by year end. The spending pattern is in line with trends from previous years which show that the bulk of capital expenditure takes place in the last quarter of the year. Where this is not possible, the allocation, to a maximum of 10%, will be rolled over into the next year.

As the Deputy will be aware, capital spending has general characteristics which influence the allocation drawdown pattern. Expenditure on capital projects typically occurs in large payment tranches at fixed milestones, unlike current expenditure which is generally continuous throughout the year. Obviously, this affects the phasing and profiling of capital expenditure. The profiling of capital expenditure is carried out by individual Departments on the basis of the likely timing of payments related to capital projects and programmes which they deliver.

In June of this year, I announced additional Exchequer investment of €150 million. The focus of this investment will be on relatively small-scale capital works that are labour intensive. Specifically, €50 million will be invested in maintenance and repair of our local and regional roads, €50 million will be used for retrofitting of local authority housing and €50 million will go towards refurbishment, replacement and extension works to 28 schools. Through this additional investment, I hope the jobs impact of Exchequer capital spending will be significant this year and into next year.

The reason I raise this is that last year, the Minister underspent his capital budget by €145 million, even though I am sure the talk this time last year was that he expected to spend it all. The Department of Finance and NAMA project that €1 billion of capital expenditure equates to anywhere between 10,000 and 17,000 jobs in the economy, so the Minister's underspend last year alone cost up to 2,000 jobs. So far this year, the Minister has underspent by 17% or €305 million. Some of that will be spent by the end of the year but it raises the question that if the Minister knows most of the spending will occur in the last three months of the year, why does he not adjust the profile to reflect what he knows to be the reality. I am concerned that Departments, especially the Minister's Department, cannot get that right.

The Minister mentioned the roll-over of unused capital expenditure. Much of that was in water services departments. The biggest element ties in with the earlier comment on water services and the possibility of local authorities holding back on using some of their own funds to co-fund major projects. That will leave a deficit in water services which Irish Water will not want to know about.

I was very honest with the Deputy when he asked this question. There was a significant underspend last year by local authorities on the water system. They saw Irish Water coming along and did not want to use any of their own co-funding money to do sanctioned water schemes. I applied as much pressure as I could but local authorities are independent in making those decisions. It is certainly an issue.

I want any allocated capital to be spent because I scrimp and save and push to get that capital. I had discussions with the European Investment Bank, the Council of Europe Development Bank and with our domestic banks to find capital. We need to supplement the capital spend on the public side because so little is being spent on the private side, except for foreign direct investment, with Intel and others building. We need to ensure what is allocated is spent, and I will continue to endeavour to do that.

The Deputies opposite can help in the committees by ensuring periodically during the year that line Ministers apply whatever pressure they can, whether in the education sector, the environment sector or whatever sector, to ensure voted money is spent in accordance with their scheduling.

The Minister trumpeted the €150 million in further investment in capital projects during the year, but this ignores the fact that he cut the capital budget this year by €500 million. Even allowing for the additional €150 million, the budget will be down €350 million, which costs approximately 6,000 jobs.

I think we have discussed this before, but the Minister should have put some mechanism in place so that where local authorities spend their development levies, they could, in some way, be compensated for that in the transfer to Irish Water. I am not saying extra money but Irish Water should not get the value of local authority funding. Irish Water should acknowledge, in some way, the recent spending because this will continue until Irish Water is up and running. I am concerned that this will stall and Irish Water will not have the resources in its first six months or 12 months of operation to continue much-needed work. Water service is not a nebulous concept. It is water quality and service which everybody needs.

I agree with much of what the Deputy said. As he knows, we are putting a tranche of investment into Irish Water through the National Pensions Reserve Fund. Legislation will be brought in before the end of the year by the Minister for Finance, Deputy Noonan, which will change the National Pensions Reserve Fund into the Ireland Strategic Investment Fund. That device will be a primer of jobs across the economy.

In 2011, we announced what the profile of capital expenditure would be, so there is nothing new. We are not cutting every year. We had to balance the books as best we could. We are spending almost €17 billion in the voted public capital programme. That is being supplemented by other announcements I have made, such as the €2.25 billion last year and the €150 million, modest enough as it is, this year. One hopes there will be more announcements when the sale of State assets comes through to supplement necessary capital investment. In terms of the monitoring about which the Deputy spoke, he made some good suggestions which will certainly be reflected on.

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