THE government's Summer Economic Statement had little new in it, given the current budgetary constraints, but is noteworthy for the very welcome, if somewhat belated nod it gives towards future infrastructural spending, which fell away behind in the aftermath of the economic downturn. Once projects that had been planned during the Celtic Tiger boom time era were completed that was effectively the end of infrastructural works and there was very little done since Fine Gael got into government in 2011 as they concentrated on balancing the books.Â
Budget 2018 will see the government's borrowing requirement for day-to-day expenditure go below 0.5% of GDP and, from 2019, it should also be possible to put something aside in a so-called Rainy Day Fund to buffer us against sudden external economic shocks in the future. This contingency plan was part of the âConfidence & Supply' agreement between the government and Fianna FÃ¡il and it was initially envisaged â but not formally quantified â that â¬1bn per annum would be put aside, however the plan now is to just keep half of this and put the other â¬500m towards infrastructural projects, which is appropriate given the huge deficit in this regard across so many areas, including housing, water, roads, transport, broadband provision and education.Â
This and further capital funding from other sources will make up the estimated â¬2bn annually the government wants to spend on infrastructural works over the 10 years starting in 2019. In the coming months, it will be producing a National Planning Framework which will set out, in a 10-year capital spending plan, the works it wants to tackle, which are so essential given our increasing population.Â
Even though it may have grated on some people, officials of the International Monetary Fund (IMF) were in Dublin last month â at the invitation of the government â to carry out a Public Investment Management Assessment (PIMA) mission, evaluating and advising on the infrastructural spending plans for the coming decade. The cost of this was borne by the IMF and it having had independent oversight will, hopefully, see the projects chosen based on necessity rather than political expediency.
Roads projects such as a long-overdue Cork-Limerick motorway should get the green light under the plan and there are high hopes that the Macroom by-pass will be advanced also. The most vital piece of infrastructure still needed is the provision of high-speed broadband across the whole country and the stop-start nature of the National Broadband Plan has been nothing short of disappointing and frustrating; the upcoming 10-year plan needs to accelerate this because of the huge economic benefits it could bring to rural areas in particular.
Fianna FÃ¡il has called on the government to be imaginative in drawing up the capital spending plan and to look for alternative funding mechanisms such as getting the Ireland Strategic Investment Fund, which has an estimated â¬6.3bn invested in global markets, to invest in the domestic economy. Public Private Partnerships, FF suggests, should also be used more, where appropriate, and it has urged the government to cast off the shackles of not spending more than 10% of the capital expenditure budget on PPPs, quoting the National Treasury Management Agency's contention that PPPs offer useful alternative means of financing some of the country's significant infrastructural requirements.
Meanwhile, the Summer Economic Statement smacks of prudence, given that the so-called fiscal space â the amount of cash available for extra expenditure and tax cuts â is just â¬500m and more than a third of this will be needed to cover the recently-agreed public sector pay increases, so there will be less that â¬350m to work with and, as per the programme for government agreement, two-thirds of this must be public expenditure and the other third tax cuts. However, there are so many demands for extra money to be provided in areas such as healthcare, housing and education that it will be spread really very thinly.Â