Tuesday, 29 September 2020

Ceisteanna (94)

Mairéad Farrell


94. Deputy Mairéad Farrell asked the Minister for Public Expenditure and Reform the way in which the emergency measures in budget 2021 will increase capital expenditure in 2021 to €9.1 billion as per the July stimulus; and the way in which this differs from the Revised Estimates for Public Services published in December 2019, prior to the Covid-19 pandemic, which had already laid out capital funding of €9.1 billion in 2021. [26634/20]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte) (Ceist ar Public)

The July stimulus includes an emergency measure to increase capital expenditure by some €1 billion to €9.1 billion, which is claimed as an increase of approximately 12%. However, the Revised Estimates for Public Services published in December 2019 already laid out Exchequer capital funding of €9.1 billion for 2021. As such, I fail to see any additionality in what is indicated in the July stimulus. Will the Minister outline how the emergency measures in the budget will increase capital expenditure in 2021 to €9.1 billion and how that differs from what was signalled in the Revised Estimates published in December 2019?

I thank the Deputy for her question. As she points out, the capital expenditure levels for 2021, as originally set out in the Revised Estimates Volume of December 2019, amounted to €9.1 billion. This figure, which was set out in advance of the Covid-19 pandemic, was almost €1 billion, or 12%, higher than the corresponding 2020 allocation.

As part of the July stimulus, the Government decided that rather than scaling back on planned capital investment in 2021 in response to budgetary pressures elsewhere, we would commit to preserving and maintaining this unprecedented level of capital investment. It is a commitment I will carry through fully in budget 2021. Of course, the precise configuration and prioritisation of the overall increased 2021 capital allocation of €9.1 billion, including the remaining unallocated reserve and any potential for enhancement to those allocations, will be specified further and more comprehensively in the context of budget 2021.  

The national development plan, NDP, sets out five-year expenditure allocations by Department for the period 2018 to 2022. These multi-annual allocations are devised to give Departments a degree of certainty for future planning. In direct response to Covid-19, however, the Government made necessary and large-scale revisions to capital allocations for 2020. The capital expenditure allocations for 2020 were increased by in the region of an additional €1.5 billion, bringing total capital investment for 2020 to above €9.7 billion. This is the highest ever investment in capital projects and programmes in the history of the State.

In line with programme for Government commitments and in my capacity as Minister for Public Expenditure and Reform, I am bringing proposals to the Government regarding the launch of a structured, in-depth review of the NDP in order to advance the priorities identified in the programme for Government, including climate change, housing policy, transport policy, implementation of Sláintecare and balanced regional development, aligned with the associated multi-annual resourcing requirements. The revised NDP, to be published next year, will assess the balance of resourcing between sectors in light of the programme for Government and will consider if there is a need for any strategic changes in allocations beyond 2021.

The figure of €9.1 billion was mentioned in the Revised Estimates for Public Services. Prior to the pandemic, we saw voted capital expenditure of that sum for 2021. It is my understanding, therefore, that there is no additionality in what is currently proposed and we are left exactly where we started. Capital expenditure was always planned to be at around the €9.1 billion mark. That was the plan before the onset of the Covid crisis and it is the plan now.

Capital expenditure has a large positive multiplier effect in terms of employment and as a means of tackling the crisis in comparison to the likes of the services industry. The Irish Fiscal Advisory Council, IFAC, has demonstrated that fiscal policy can have positive and significant initial impacts on Irish output. According to EUROSTAT, in terms of investment as measured by gross fixed capital formation, we are currently the worst-performing economy in the EU. Yet the Minister is saying that the allocation for capital investment is the same as initially stated, before the current crisis.

First, we should not understate the significance of the State committing to a capital investment programme of more than €9 billion at a time when we are forecasting a deficit in the current year of somewhere in the region of €25 billion to €30 billion. Ten years ago, in very different times and when different circumstances applied, capital expenditure was slashed by some 60%. What we are doing now is in marked contrast to what happened in the past. We are going to maintain, and have the ambition to increase, capital investment.

The within-year increase in capital expenditure this year was for exceptional measures. These include the measures in the July stimulus programme, under which some €500 million was added. There is approximately €900 million extra in the Department of Business, Enterprise and Innovation Vote, much of it to do with the enterprise grants, restart grants and so on which were brought forward as an exceptional measure this year. The Deputy should reserve final judgment until she sees the actual allocation on budget day. On a no-policy-change basis, we are saying that it is €9.1 billion. That does not mean things are set in stone with regard to budget day.

It seems that the current indicated allocation is the same €9.1 billion that was indicated before the crisis. I have also heard rumours circulating that the Government plans to keep capital expenditure at around the €9 billion mark for the duration of this crisis. That greatly concerns me because we do not know how long that will be. All indications are that the crisis will last for some time. If we assume that it continues for a two- to three-year period, then this provision represents a real cut per capita when factoring in inflation and population growth. It is austerity by stealth, under the table or through the back the door. Call it whatever one wants but we have seen it before.

The Minister said that this Government is taking a different approach to this crisis from what was done previously. We saw during the last crisis, especially after 2014, that despite the announcements that austerity was over, it did, in fact, continue, albeit in a sneakier fashion. A recent report from the Halle Institute for Economic Research on the impact of Brexit estimates that more than 700,000 jobs will be at risk in the EU, with Ireland set to lose more than 35,000. We are facing a crisis on two fronts and the State needs to be willing to step in with the types of large-scale capital projects that can offset the decline in private sector investment. If that is not done, people will feel the hit in their pockets. People are not naive.

I strongly support investment in capital expenditure projects. Now is the right time to make that investment because we can borrow at historically low levels of interests. There are many unmet infrastructure needs throughout the country. We have an opportunity now that should be taken and it falls to me to be the advocate within Government for doing so. To be fair, the prioritisation given to capital investment within the programme for Government is very clear. The context within which we are maintaining more than €9 billion of capital investment next year has changed dramatically in the past six months. The reality is that we will probably get a lot more done with the same amount of money, given the changes we have inevitably seen so far and are likely to continue to see within the construction industry. There is already evidence of better value for money coming into the process of tendering for projects.

I ask the Deputy to reserve her judgment. To be clear, there has been no decision within Government simply to maintain capital investment at this level through the unknown duration of the crisis. The NDP review will happen in the coming months and it will set out a capital expenditure envelope for the next decade.