Accountability and value for money:The spending level may put upward pressure on inflation, and there is concern that the public service lacks the expertise to manage such a large-scale plan, write Colm Keena.
When you're going out to the shops to spend €183.7 billion of someone else's money, €78 billion of that on major capital projects, you need to take care that you get value for money.
The issue has loomed large over previous national development plans, but the Government was insistent yesterday that this time it will be different. The value for money issue breaks down into macro and micro issues.
On the micro side is the question of the ability of the State to adequately evaluate major projects prior to their commencement, and then have them delivered on a value for money basis.
Minister for Finance Brian Cowen has admitted there have been difficulties in the past, but says the bulk of capital projects are now being developed on or below budget, and within schedule.
This is the case with road projects being overseen by the National Roads Authority, but Opposition politicians such as Labour's finance spokeswoman Joan Burton say it is not the case with non-road projects. Bringing a project in on time and within budget is not such a great achievement if the project was ill-conceived in the first place, or too generously priced, or both.
The Economic and Social Research Institute (ESRI) has expressed concerns about the level and quality of evaluation that goes into major projects before they get under way.
The second broad issue is the macro one of inflation. Will the scale of the activity envisaged add to Ireland's already high inflation rate?
It is worth recalling how badly matters have turned out in the past. The planned budget for national road improvements between 2000 and 2006 was initially €5.6 billion. This was later revised to €7 billion, but reached €15.8 billion within a two-year period. By 2003, the figure had risen again, to €16.4 billion. In total, the Government spent €9.4 billion more than planned.
The massive spending on roads and other projects contributed to localised inflation. According to the ESRI, inflation in the road construction sector in 2000 was 16 per cent. Such developments in one part of the economy contribute to general inflation and the reduction in international competitiveness, which yesterday's plan recognises as one of the key problems facing the economy.
The ESRI has urged the Government to reduce the amount it plans to spend each year on this latest plan, warning that pouring so much money into large infrastructural projects could encourage inflation.
However, the Government has not been persuaded by this argument and has decided to push ahead with its plans.
Brian Cowen has said he believes the capacity is there in the construction sector to allow this level of infrastructure delivery without creating upward pressures on inflation. He is also insistent that the know-how is there to allow for the improved management of large projects.
The plan states that the "bulk of capital projects are now delivered on or below budget, and in certain instances, ahead of schedule. Assessment and management of value for money for all expenditure under this plan will build on this recent experience".
A central expenditure evaluation unit has been set up in the Department of Finance and it will have oversight of the value for money issue. All projects under the plan are to be subject to department guidelines, designed to ensure that value for money criteria are met.
There is to be individual project appraisal to ensure programme objectives are met and value for money achieved. There is to be a full cost-benefit analysis of all projects valued at more than €30 million.
This is the first development plan that will be funded almost entirely by the Irish, as against the European, taxpayer, and so it will not involve the level of oversight from Brussels that occurred with previous plans.
There will be no oversight function for this plan outside the Irish public service. It is a massive programme and some observers fear the required expertise simply does not exist within the public service to manage something of this scale. Time will tell.