Dáil Éireann debate -
Tuesday, 23 Apr 2024

I have raised the issue of capital expenditure with the Minister on many occasions. The NDP in 2021 set a target of 5% of GNI* to be invested in capital projects. The NDP states "the Government has decided to maintain the average level of investment in the new NDP at approximately 5 per cent of GNI* over the period 2021-2030". This has not happened in a single year since the NDP was published. On that basis, what is the cumulative underspend since 2021?

I thank the Deputy. As Minister for Public Expenditure, National Development Plan Delivery and Reform, I am responsible for setting the overall capital allocations across Departments and for monitoring monthly expenditure at departmental level.

The responsibility for the management and delivery of individual investment projects, within the allocations agreed under the national development plan, rests with the individual sponsoring Department in each case. Each Minister is responsible for deciding on the priority programmes and projects that will be delivered under their remit within the NDP and for setting out the timelines for delivery. The NDP published in October 2021 provides a detailed and positive vision for Ireland out to 2030 and delivers total public investment of €165 billion over the period 2021 to 2030.

In recent years, the delivery of the plan has been adversely impacted as a result of pandemic-related pauses in the construction sector, labour supply issues, the inflationary impacts from both Covid-19 public health measures and the inflationary consequences of, among other things, the war in Ukraine. Capital projects can go under or over profile for other reasons, such as delays in planning, delays caused by the rising level of costs, supply chain disruptions and skilled labour shortages, all of which can lead to delays.

The rolling multiannual capital envelopes introduced in 2004 allow Departments to carry over up to 10% of unspent voted capital expenditure from the current year into the next, although this is not technically considered to be an underspend as the funds remain with the Department. The total level of carryover sought from 2023 into 2024 was €520 million, which was 4.1% of the 2023 total gross voted capital allocation.

The NDP set the target of expenditure as a share of GNI to properly account for inflation, especially when we are talking about a multiannual plan and indeed a multi-billion euro plan like the NDP. Since 2021 we have seen the high levels of inflation, particularly in construction, yet the funding was never adjusted to account for it. Budget after budget, the Government has acted like inflation did not exist. Does the Minister really expect people to believe that the ambition set out in the national development plan can be met when funding has not been adjusted to account for inflation? Again I ask the Minister to outline the cumulative underspend on capital projects. In 2021, the NDP was underfunded by almost €1 billion, in 2022 it was underfunded by €2.2 billion, and in 2023 the NDP was underfunded by €2.3 billion. This year, the NDP was projected to be underfunded by €2.4 billion. That is a €7.8 billion under-investment in badly needed capital projects.

I thank the Deputy. In the written parliamentary answer she shared with my Department, she referred to capital spending based on the targets set out in 2021 and we interpreted the question as meaning the expenditure targets that were set out in 2021. I will certainly ask my Department to see if we can come back to her about what the expenditure would have been if it was based on a share of GNI. The language that was included in that development plan set a target. We also have many other targets that need to be delivered, including with regard to current spending, as the Deputy will be aware. The Deputy is aware of all the other current spending pressures the Government has to contend with to make progress on all of the things the Oireachtas wants to see improved and, overall, to ensure that expenditure is growing at a reasonable rate that is not creating risks for the taxpayer in the future. It does mean that we have been increasing capital expenditure at a very fast rate. We cannot get all the way up to the 5% figure. The reason for that is that we have had to find money to pay for increases in current expenditure at the same time and we cannot do both.

What I am really concerned about is the deficit that is already there in terms of infrastructure, particularly in the region I come from, and the under-investment in the west and north-west region. Having not accounted for inflation in the way we do, I am concerned about the hole that is there and the cumulative impact it would have. That was my question. I see now in my own constituency projects being delayed, such as school projects that were promised and that people thought were already over the line. Now suddenly a lot of them seem to have stalled. I am concerned that because of the impact of inflation, we are delaying projects further, not for any other reason such as planning permission or anything else but because we are not spending what we need to spend. I completely understand about heating up or increasing inflation and the need to manage that. The report made recommendations in terms of having shovel-ready projects that are not labour-intensive and all those things, so there are many investments that can be made and that need to be made under the NDP.

Across the same period, capital expenditure has increased considerably. In 2021 it stood at €9.78 billion. That was an increase of 19.8% versus the previous year. From 2021 to today, this year, it has increased from €9.78 billion to €13 billion. There has been a very big increase in the overall rate of capital expenditure. This has been done not just to cope with the effect of inflation and the cost of raw materials, but also with a view to increasing output and allowing the State to do more. There always will be a case made to spend more on capital projects. We have done that, but if we are trying to make sure expenditure overall is growing at a reasonable pace that can be affordable to the taxpayer both now and in the future, we have to take account of the current spending needs that exist. That is what we have looked to do year on year as well.

Some of us thought the Housing for All targets were inadequate to begin with. The housing crisis, ever worsening, is testimony to the fact that is the case. There is now a growing consensus that we need to dramatically increase our targets. The Housing for All targets of 33,000 per average year are not enough and we are not delivering on the social and affordable targets in any event. Is the Minister considering changes to the national development plan to ramp up the plans for housing and, in particular, for social and affordable housing?

The Minister for housing has indicated that the level of housing targets for the years ahead is something he is considering. The Deputy will be aware that the Government agreed in March to the deferral of the approval of a revised national planning framework, and to set out a revised timeline for the process. This is informed, to a significant degree, by census data. The postponement of the census in 2021 due to the pandemic resulted in the delayed publication of crucial census outputs relating to housing and demographics. In light of the extent of recent demographic change and the implications for future population projections and structural housing demand, the Government has decided to defer the approval of a draft revised national planning framework until the full set of data required to properly consider matters relating to demographics and population projections has been completed by the ESRI. The ESRI has produced a draft final report which is now subject to peer review. The independent report will be published by the ESRI once all the final reviews have been completed. To recap, the ESRI is doing an independent research project on what future housing needs could be. Once that has been received by the Minister for housing and considered by the Government, this will then lead to a consideration of what our future housing output targets should be for the medium term.

The ESRI has already indicated that target of 33,000 in Housing for All is inadequate. There is a general consensus that we need at least 50,000 a year. When the Housing for All targets were first set, in my local authority we did the maths and it was clear that the failure to take into account those who will join the housing list meant that at the end of Housing for All, and this was a few years ago, there would be more people on the housing list in Dún Laoghaire-Rathdown than there were when the targets were set.

The Government seems unwilling to acknowledge that the targets were always inadequate. It is now absolutely clear that they are wholly inadequate. The problem is that even those targets cannot be delivered on in regard to social and affordable housing in particular. It is all well and good to talk about the census being delayed and the national planning framework, but there must be a recognition that we urgently need to ramp up the targets, to deal with the problem, which is that we are unable to deliver even on the existing inadequate targets, and to do something about it in regard to the national development plan.

The publication by the Government tomorrow morning of the latest update on the delivery of the housing action plan will show the progress we are making in the delivery of our housing targets. The Deputy only has to look at the figures for the first quarter of this year - the number of commencements and the number of homes currently being built - to see that we will do more than deliver on our targets for this year. That, in turn, will set the foundation for the delivery of more homes into the future. If we are to make the progress necessary to build more than 40,000 homes per year, we need to build up our ability to do it. We need to have a labour sector that is big enough, with the people available to do the work. We need to ensure the right projects are being delivered. We are doing that at the moment. While we will always need to make more progress in terms of supply and affordability - this is the case throughout Europe - increasingly we are seeing more houses, apartments and homes being built, year after year, by this Government. I believe this is reaching a height under our Administration this year, allowing us to set even better targets for the years ahead.

It is still not enough. We have record numbers in homelessness, huge numbers on housing lists and a particular failure to deliver social and affordable housing. Even properties that are built are too expensive. They are completely out of the reach of the vast majority of people. It is clearly not enough. The Minister raised the issue of capacity. The NDP says that the Government will strengthen the capacity of local authorities to deliver social and affordable housing. The local authorities seem to have no capacity to deliver housing. We have argued for a State construction company and for massive recruitment of tradespeople, construction workers and so on in the local authorities in order that the State will have its own ability to deliver capacity. Instead, the Government leaves it to the private sector. However, as said by Goodbody Stockbrokers and others, the private sector does not have the capacity to do it. If the targets have to go up, and given that it is clear that the existing targets cannot be met, what is the Government going to do to build up the capacity to deliver housing, particularly the social and affordable housing we so urgently need?

The Deputy is acknowledging that the capacity was not there for some time because our construction sector needed to grow. Regardless of whether the State or a private sector developer was trying to employ them, the reality is that we were constrained because we did not have enough people available within our country to build the homes we need. That is improving. We are beginning to see more people working in the construction sector than we have seen for some time, in part due to the work that is under way with an improved apprenticeship pipeline. The Deputy always makes the inference that anything the private sector does - such as a home being built by a developer who wants to make a profit out of it - is bad or not to be trusted. That kind of ideology is a recipe for Ireland building fewer homes in the future. We need local authorities and approved housing bodies to build social and affordable housing - I accept we need to do more of that - but we also need a private sector that is capable of standing on its own two feet and of building more homes. We are making progress in the delivery of that.

Under this Government we have seen the expanded use of controversial public private partnership, PPP, contracts in housing, in health, education and other areas. I have previously raised my concern about value for money on these contracts. Today I will focus on the privatisation of services that comes with such contracts. Will the Minister outline the typical services that are privatised or delivered by a private company for 25 years under these contracts?

My Department's primary role in regard to PPP contracts is to facilitate the PPP process centrally by developing the general policy framework, including where necessary the legal framework and the capital investment policy framework, within which PPPs operate and by providing central guidance to Departments and other State authorities in that context. PPPs are partnerships between the public and private sectors for the purpose of delivering a project or service. Some of the advantages associated with them are that they allow the public sector to avail of private sector expertise and innovation and that the private partner assumes responsibility for a considerable portion of the risk.

PPP contracts tend to be long-term arrangements, typically spanning 25 years or more after construction. They can be design, build, finance and maintain, DBFM, projects; design, build, finance, operate and maintain, DBFOM, projects; or concession projects. DBFM projects require the PPP company to provide and maintain the asset or infrastructure but not to operate it. This is likely to be used to provide schools and similar infrastructure. In such cases, the public sector will want to use the asset but will not require the private partner to provide the attendant service. In the case of a school, the public sector would employ the teaching staff. DBFOM projects effectively require the private sector to replace the public sector for the duration of the contract. These projects require the private sector to provide, operate and maintain the asset or infrastructure. In the case of a water treatment plant, for example, this would require the private sector to staff the plant to ensure service delivery on behalf of the public sector contractor. Unitary payments are made over the life of the PPP contract, typically 25 years after construction. Concession projects differ from other PPPs in how they provide a financial return to the financial sector. Unlike other PPPs, the private sector achieves its financial return in these cases by levying a user charge on the service.

I thank the Minister. I know what PPPs are. The average PPP contract is procured by the National Development Finance Agency. One third of the cost of the contract is to pay for services that would normally be delivered by the public sector. That could be cleaners in schools, security in technological universities or maintenance of public housing that should be managed by the local authority. These services are privatised into the hands of a single company for 25 years. This is the real area of interest to the companies that bid for these contracts. Will the Government reconsider its approach to more PPP contracts and the privatisation of services? That is the real purpose of these contracts. I do not believe we are getting value for money. Contracting out a service for 25 years is a whole different ball game. We cannot ensure value for money.

The concept of privatisation implies that there is a public service being delivered in the first place that is then discharged out to the private sector. As the Deputy already knows, the reason I separated the different PPPs is that we tend to have the public service being delivered for a project that has been built by the private sector. A wastewater treatment plant is a good example. By delivering it via PPP, we got a new plant and we get the staff to manage it. When talking about privatisation, it is not the case that the plant existed in the first place and then the staff were moved from the public sector into the private sector. We are talking about something entirely new: a new asset with new staff to maintain the asset. I assure the Deputy that we always compare and contrast and evaluate whether it is right for the State to go ahead and directly build the project itself through the local authorities and through organisations such as Uisce Éireann, or whether it is better done through a PPP. In some cases there is merit in using the PPP because it allows the State to manage the cost over a longer time period.

There is no transparency around these contracts, even long after the deals have been signed, so we have to ask where the oversight and accountability are. When the Minister had this portfolio in 2017, the IMF recommended Ireland reduce the sums Departments could spend on PPP contracts. Departments are not supposed to spend more than 10% of the capital budget, as the Minister knows, on annual PPP contract payments. This level has stayed the same and has not reduced. The IMF recommended the Minister restrict the areas for the use of these contracts, such as to traditionally social areas such as healthcare, education and housing, and the opposite has happened. Why, therefore, has the Minister chosen for the past seven years to ignore that recommendation from the IMF and why has the Government drastically increased the use of PPPs?

From the information I have to hand, it does not appear to me that there has been a drastic use, or increase in the number, of PPPs. In the case of, for example, the social housing PPPs, across two different bundles they relate to 1,000 homes nationwide, which is a relatively small share of the total level of social housing that is being delivered. The majority of it is being delivered either directly through local authorities or through approved housing bodies, AHBs. In various policy areas, it appears the use of PPPs, especially for housing, forms a relatively small share of the overall level of housing the State is involved in delivering.

As I said, the reason PPPs are used is that they allow the State, by spreading its payment over a longer period for building, for example, a group of houses, to build more and to achieve more in any given year. That is the only reason it is done.

The catchment flood risk assessment and management, CFRAM, programme was the largest study of flood risk in the country, studying the flood risk for two thirds of the population. Following this CFRAM assessment and the proposal of options, Galway City Council appointed consultant engineers in November 2020 to design a detail option to protect the city from a significant flood event in the future.

During this time, it has become apparent the scale of flooding risk in Galway city is greater than suggested in the strategic CFRAM study. The process of redefining the scope for the Coirib go Cósta - Galway City Flood Relief Scheme, which is at stage 1, scheme development and preliminary design, has taken longer than first envisaged due to the need to complete some coastal assessments that did not form part of the CFRAM programme, and the complexity and increase in the scale of the scheme, identified by the assessment of hydrology and hydraulic modelling for the city. A draft revised scope reflecting additional works for the scheme has been presented by the scheme’s consultants to Galway City Council, which is the lead authority for the scheme. To give context to the increase in the scale of the programme, the scheme was originally to protect 312 properties, whereas today the scheme is being designed to protect 940 properties, or three times more.

Until such time as an option for the detailed design for the Galway city scheme is available, there is no evidence or information that can support any accurate assessment of possible costs and budgets for this scheme. The CFRAM programme had estimated a total project budget of €9.5 million. However, given that the scale of the project and required defences are far greater and will protect more than three times as many properties, the best estimated cost for this scheme at this time is in the region of €50 million. The Government is committed to the design and completion of a flood relief scheme for Galway city and is committed to funding this scheme, once a viable scheme has been identified, through the national development plan, which has allocated €1.3 billion for flood relief measures.

I will reread my prepared statement to be precise. I referred to the scale of the project and the fact the required defences are far greater, given we are now dealing with 940 properties rather than 312. I also mentioned hydrology, the further tests that are required regarding the impact of waves and the fact the scheme will protect more than three times as many properties. The best estimated cost for the scheme at this time is in the region of €50 million.

The figure has increased, therefore, from €9.5 million to €50 million. Those 940 properties include the area in which I live, Claddagh, but also a lot of other areas such as Long Walk, Spanish Arch and the Eglington Canal. As long as I have been asking this question for the past two or three years, those projects have all been included. The Minister of State's predecessor, Deputy O'Donovan, who was very au fait with this, as I am sure the Minister of State will soon be as well, expressed frustration at the lack of progress on the scheme. There have been five different phases and we are at stage 1, the options assessment. Construction in Galway was to start in 2026. Now, not even a planning application will be put in until 2027. We are flooded practically every year. I cannot understand what the delay is. It has been more than three years. I was a member of the council when the CFRAM maps were being created. That process started in 2012, and we knew then that it was not being planned for properly.

I am out of time, so I will follow up in a moment.

The Deputy will appreciate I have just come into my brief, but I have made myself familiar with the scheme. As she will know from my previous role, I am all about process. To give an update, the revised scope has been reviewed by the Coirib go Cósta steering group members and agreement has been reached on the revised scope, subject to agreement on a fee proposal with the consultants. Galway City Council is currently liaising with the consultants on its fee proposal, and once it has been agreed, the project programme can be finalised. It is the intention of the project steering group to publish an updated project programme to the project website shortly thereafter.

I will follow up on this. I note the Deputy's concern about progressing the scheme and I am committed to addressing the representations she is making.

The process started in 2012, and when I left the council in 2016, it was finishing the process of identifying the flood risks. We are now in 2024 and all the stages have gone by the board. Instead of construction starting in 2026, a planning application is now going to be submitted in 2027. I do not think the Minister of State could be happy with that, given Galway city is flooded practically every year, without exaggeration. My office is in that area, so I have a particular interest, even though it is only an office, which is nothing compared with what the homes are suffering. Every year, there is a cost to the Exchequer, not to mention the damage to the homes, problems with insurance and everything else. I have no idea what is going on and I do not think the steering group does either. The website has not been updated. Different targets have been given but none of them has been met. All I am told is there is complexity. I live in Galway, opposite Galway Bay, so I know how complex it is, but the steering group knew that from day one. It has either misjudged everything, therefore, or there is some incompetence somewhere along the line. Something is wrong somewhere in this scenario.

My role as Minister of State is to progress the scheme as I have taken it over. In terms of process, the revised scope to deal with the 940 properties is being reviewed by the steering group and agreement has been reached. It is now agreeing the fee proposal with the consultants, Arup, and once that has been agreed, the steering group will publish the updated project programme on the website, which will happen shortly. I am committed to following up on this to ensure it will happen as quickly as possible.