For the past four years we have been telling industry, investors and authorities that there’s a capital plan on the way. After over ten years of underinvestment in infrastructure one could be forgiven for thinking it was inevitable. However it has taken a lot of time and effort to get us to this point and as a result there’s now a deficit or a gap in our infrastructure that we need to close says KPMG's Robert Costello.
The “infrastructure gap” is a frequently used term to show the investment need for infrastructure as a proportion of GDP. Where the investment in capital is less than what is required, it creates this gap. In Ireland the difference between the required infrastructure and our current infrastructure is significant. We regularly hear about a housing crisis and a lack of social and affordable homes, a health crisis with hospitals operating beyond capacity, congestion on the M50 or in other cities such as Cork and Galway and a water system with almost as much leakage as retention.
These issues exist due to a number of factors. These include an improving economy, employment growth and an ageing population - however the main contributor has been the lack of government funding. After years of austerity, capital was sacrificed in order to sustain current expenditure and repay debt. This could have been different. In other countries, such as Australia, when there was a sign of the economy slowing down. they chose to spend more on capital, stimulating jobs and boosting the economy. It’s a bold move and requires careful planning but it can pay off.
Now the much anticipated news has been delivered. We have a National Planning Framework and a ten year Capital Plan with over €115 billion to be invested. Some highlights include:
These are big projects and will take time to deliver. So it’s important that the government gets activity underway now. Careful planning is required to make sure the most appropriate methods of delivery are chosen. This involves analysis in accordance with the Public Spending Code. Some projects will be more appropriate for direct government funding while others can be structured to attract private finance. Procurement will also be important. There are specific and stringent procedures that have to be followed but planned well, these can be navigated efficiently and work to the advantage of the relevant authority and the project.
These projects cost a lot of money and need appropriate oversight and governance to be delivered efficiently and within timeframes. Project teams and decision makers with delegated responsibility should have the autonomy but also the accountability to get on with the job without too much obstruction. Delivery authorities should also be thinking beyond the construction to the operation of the infrastructure asset. This means they should appraise and plan for the long term operation and governance of assets that are likely to last well over 30 years. The evolution of technology should also be considered when planning these projects. For example, autonomous vehicles may not be a reality on our roads now but they are likely to be in 10, 15, 20 years’ time. What does this mean for the size of our roads, car parking, the need to work from an office etc.?
This announcement is positive for Ireland. Finally - a plan to help stimulate and sustain economic growth and social development. But the hard work has only begun. Time to roll up the sleeves and get it done!