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Project Ireland 2040 is the Irish Government’s long-term overarching strategy to change how investment is made in public infrastructure in Ireland. A composite of the National Development Plan (‘NDP’) and the National Planning Framework (‘NPF’), the overarching aim of Project Ireland 2040 is to move away from the approach of the past, which saw public investment spread too thinly and investment decisions that didn’t align with a well-thought-out and defined strategy. Michele Connolly and Robert Costello of our Infrastructure practice outline the KPMG view.

Earlier this year, the Government undertook a review of the National Development Plan. The public consultation sought views on ensuring that the overall level of capital investment planned for the future is set at the right level and also to establish what needs to change to deliver more quickly on meeting Ireland’s challenges and to fulfil the priorities in the Programme for Government, including on housing, health, climate action and transport.

KPMG has long been advocating for increased capital investment commitments, changes to policies and practices and the removal of roadblocks to ensure more timely delivery on projects. Our response to the Government’s submission reiterated these points, along with other suggestions as to how we can deliver on what is planned better and faster. 

The infrastructure gap

It is projected that by 2040 there will be circa. one million extra people living in Ireland. This population growth will require hundreds of thousands of new jobs, new homes, more cultural and social amenities, better regional connectivity and improved environmental sustainability. The NDP sets out the strategic investment plan to achieve this.

Currently, the annual level of capital expenditure in Ireland is just below €10 billion per annum, which is tracking the level of planned spend set out in Project Ireland 2040. This a significant increase on capital expenditure between 2008 and 2018. However, there is still a large infrastructure gap in Ireland across a majority of sectors – health, education, housing and public transport. In addition, Ireland has renewed climate and sustainability targets for 2030 and 2050 which must be met to avoid the existential threat to our economy and society. This also requires significant capital investment in areas such as energy, built environment, and electric vehicle charging infrastructure. 

COVID – The opportunity to respond

The COVID-19 pandemic has provided the country with a once in a generation opportunity to accelerate investment and capital expenditure in an effective way. Funding is available at a country and EU level and the cost of this funding has never been as low. For example, EU funding is being made available through the Recovery & Resilience Facility – a €750 billion fund to help in the recovery plan from COVID-19. Half of this is grant funding and must be invested by the end of 2026. Ireland should aim to take full advantage of these grants. Additionally the IMF recently stated that public investment can play a central role in the COVID-19 recovery. It has the potential to directly create “between 2 and 8 jobs for every million dollars spent on traditional infrastructure, and between 5 and 14 jobs for every million spent on research and development, green electricity, and efficient buildings.”

In the short term, the investment will deliver a boost to the economy through the provision of jobs but, in the long-term, there will be even greater societal and economic benefits.

Where to start spending?

When we look at the recent capital spend in Ireland it is dominated by transport and housing. Significant projects are either being planned or underway and but in housing the investment is not translating into new homes as quickly as it could and should.

There are two areas that stand out as having limited capital investment: climate action and health.

  1. Climate Action: All capital projects should now be required to be cognisant of the Climate Action Plan and ensure sustainability is designed into the projects from the outset. Budget 2021 includes commitments to meet the Climate Action Plan including funding of home retrofits, continued provisions of grants for electric vehicles, and grants for home and public electric vehicle chargers. These plans should be accelerated to stay on track with our objectives. Boosting capital expenditure by at least 50% per annum to €15 bn – which can be part funded by EU grants – would help a recovery but also accelerate achievement of the objectives set out in the National Planning Framework and the Climate Action Plan, many of which are lagging behind set deadlines.
  2. Health: Capital investment in assets to provide community care, elective care, and more state-of-the-art hospitals will reduce the operating expenditure currently required to overcome the many inefficiencies that currently exist. These need to be progressed through to delivery urgently. The 2021 budget includes €22 billion in spending on health, €1 billion of which is capital expenditure. This is the highest level of health spending in the history of the State, but the balance of operating to capital is wrong. 

How to make this work?

When it comes to spend focus should be put on how we deliver on what is planned better and faster. This includes:

  1. Need to eliminate internal/state roadblocks – Plans on the Project 2040 are lagging behind their original published dates. Going forward, more realistic project timelines, rather than over optimism, is required in the planning phase. Additional resources and increased capability is also required.
  2. Need for a political champion for projects – Capital investment by its nature takes time to deliver for the benefits to accrue, often up to 20 years. That will span multiple administrations and political careers. In order to see progress, projects need support from a political champion to navigate the challenges and see successful delivery.
  3. Multiyear / rolling funding certainty needed – Infrastructure development needs long-term vision that remains consistent through political changes. It needs multi-annual funding that stays certain in the face of changing day to day priorities.
  4. Pipeline – First, any review of projects in Project 2040 should concentrate on interrogating how projects can be delivered faster. Second, Ireland must attract international contractors and foster growth in the industry through the creation of a realistic pipeline, with realistic timelines. This can bring innovation, digitisation, automation and new techniques to the sector.
  5. Review our contracting mechanisms – We do need to move towards contracting methods such as the New Engineering Contract (NEC) family of contracts. This will attract greater competition and enable those contractors to target lower cost funding leading to greater competitive pricing.
  6. Planning Delays - There should be a mechanism to submit a ‘global’ planning application directly to An Bord Pleanála for the strategic national rollout of public infrastructure, such as schools, courts, nursing homes, across a number of individual counties or regions.
  7. Housing Leases - Despite significant interest from national and international sources of capital, concerns in relation to some of the Social Housing Lease terms need to be addressed to secure investment and accelerate delivery. These changes generally don’t increase the risk on the part of the State but change it to an investable proposition for international funds. 

What next?

The projects the Government is currently investing in will last for more than 50 years and therefore should be built with future generations in mind. There is significant opportunity for a connected and integrated infrastructure that puts a focus on communities and creates a sustainable way of living and working. The pandemic has presented a real opportunity to balance development with greater investment in regional towns and cities, a key objective of Project Ireland 2040. As a country, we must focus on the positive aspects of that change which are advantageous in the long-term, plan accordingly, and embed the new demands into our infrastructure indefinitely. 

Get in touch

Planning the infrastructure of the future requires informed, experienced thinking. If you have any queries on the issues mentioned above, please contact Michele Connolly or Robert Costello of our Infrastructure practice.