€140bn to upgrade transport health and education in line with European standards

Maskhadov

€140bn to upgrade state services
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Massive spending needed in transport, health and education, says report

THE country will have to spend the staggering sum of €140bn over the next 15 years if it is to bring its transport, health and education systems up to top European standards, a new consultants' report claims.

Unless this is done, "Ireland may never reach its true economic potential", according to Peter Brennan of consultants A&L Goodbody.

Public transport will need a further €25bn, the report calculates. Most of this would be spent on the Dublin rail system, with six Luas lines, four Metros and electrified railways connecting outlying towns to the capital.

"This is the most ambitious part of the investment programme, but it is also the most needed. People would be able to travel from Portlaoise to Drogheda in fast electric trains," Mr Brennan said.

The report recommends a sharp increase in spending on new schools to help increase the proportion of students getting a second-level qualification. "An investment target in the region of €13bn in the period to 2020 could reasonably be assumed," it says.

Health will require €10bn spent on new hospitals and facilities. But Mr Brennan warned that the country may not have sufficient doctors, nurses and skilled staff to run a first-class health service.

"It would cost €4bn to provide the 8,000 hospital beds we need," Mr Brennan said. "But we have to find the staff as well. The Health Service Executive will have to take a leaf out of the IDA and FAS book and look at skills available if it wants to improve the health service."

But the biggest bill of all - €40bn - would come for social housing, if the targets outlined by the social partners' think tank, the National Economic and Social Council, are to be met.

"There is a choice to be made as to whether it is sensible to spend €2.5bn a year on housing and €600m a year on education. One solution may be the proposals before Government for tax breaks to encourage the private sector to provide social housing," he said. The report says the public finances are healthy enough to allow borrowing of up to €2bn a year to help fund the plan. "We can afford it now and we should do it now, before the costs of an ageing population start to come through after 2020," Mr Brennan said.

The report points out that according to the IMD World Competitiveness Yearbook (2005), the perceived quality of Ireland's air transportation infrastructure was the third lowest of the 16 countries surveyed.

The Dublin Airport Authority (DAA) has indicated that it will probably invest €1.5bn in various projects at the airport over the next 15 years, including terminal expansion, a new runway and access to transport such as a Metro station. An increase in airport charges in the region of €1 per passenger could allow the DAA to invest around €1bn in Dublin airport.

Brendan Keenan
Group Business Editor

It doesnt take a professor to figure out that infastructure in this country is not in line with the rest of Europe. The government should bite the bullet with this one and set out a plan to spend the €140 billion. But they probably wont, they will just look at the project as a potential diaster which could cost them being re elected.


You can read the full report here AFAIK

http://www.algoodbody.ie/consulting/32013%20infastructure%20report.pdf

Maskhadov

What the Times has to say

'Infrastructure needs €140bn'
Claire Shoesmith




As much as €140 billion must be invested in Irish infrastructure over the next 15 years if the economy is to remain efficient and competitive, A&L Goodbody Consultants said yesterday.

In a report entitled Ireland's Strategic Infrastructure Investment 2020, A&L Goodbody said infrastructure should be seen as an investment by the State and not a drain on resources.

"Underinvestment in infrastructure means underperformance in the economy," said Peter Brennan, the group's managing director.

"Bold decisions are needed as infrastructure is critical for competitiveness."

He said the decisions should reflect quality of life issues such as education, childcare and commuting.

The report recommends that the Government extend the timeframe for the next National Development Plan from 2013 to 2020 and also suggests the creation of an infrastructure board to co-ordinate the projects.

The proposed €140 billion investment over 15 years compares with the Government's current capital investment programme of €36 billion over the next five years.

Mr Brennan said it was particularly important that the Government invest ahead of demand to prepare the State for the predicted increase in population - a further 1.3 million expected by 2020.

To facilitate the increase, particularly in education funding, A&L Goodbody proposes the Government lift the cap on public spending, which currently stands at 5 per cent of GNP, and consider borrowing money.

Mr Brennan also stressed the important role private finance initiatives, such as the one used to build the Dundalk bypass, would play in the increased infrastructural investment.


http://www.ireland.com/newspaper/finance/2005/0929/4040173102BZGOODBODY.html
© The Irish Times

daveg

If on paper it's going to cost E140 million you could double that when you take into account the amount it will cost our goverment with their squandering.

Maskhadov

Fixed prices contracts should in theory remove a lot of the probems. But at the end of the day the government cant even spend allocated money for infastrucural projects at the moment. There is a major problem within the system.

There needs to be new legistlation if we ever want to bring this country up to European standards. A critical infastructure bill would help and a move away from the individiual to the collective good of the country. The system is too weighted towards the individual.

I posted on another thread that the reason a government doesnt press ahead with a lot of the major infastructural projects is because it is the one that will end up with egg on its face and may cost them a election. Just look at the heat over LUAS and it was only a simple tram. There were pages and pages written about it and they couldnt get it right. Metro could be tens times worse if it ever sees the light of day.

gobdaw

Maskhadov wrote:

But at the end of the day the government cant even spend allocated money for infastrucural projects at the moment. There is a major problem within the system.

I posted on another thread that the reason a government doesnt press ahead with a lot of the major infastructural projects is because it is the one that will end up with egg on its face and may cost them a election.

You've hit the nail on the head. All politics is not local but about the next election. Groups who vote are identified and their problems are addressed to maximise votes. Decentralisation, "green pack" medical cards for over seventies and so on. No clear articulate group or groups have become identified for Greater Dublin infrastructural projects. Government proposes and directs expenditure at the end of the day, public servents impliments defined government policies.

Victor

Maskhadov wrote:

Fixed prices contracts should in theory remove a lot of the probems.

Great theory, shame about the practice. The only real saving in fixed price contracts is the overhead of calculating the increases.

Maskhadov

Surely a critical infastructure bill would help to bring down prices by shifting the focus of legislation from the individual to the collective good of the public.

Cost over runs in recent project seem to be a lot less that the early projects constructed, I take it, it is because of the new fixed price contract. That danish company outlined that there were up to 80% over runs.

Surely all that needs to be done is a a simple comparison of similar peices of infastructure would cost in other western european countries and sign a contract for that.

Bertie A hern put the new National Development Plan on the long finger again and said he would wait until the existing NDP runs out in 2006/2007. This is no doubt for election reasons. Well if he is going to do that he should at least make an effort to change legislation so that the next plan will be a lot smoother than this one.

Thomond Pk

That figure is truely frightening and would result in the National debt growing by over 300% just to give us only European norms in essential services.

Maskhadov

€140 billion / 15 years = €9.3 billion a year. Thats not a lot of money when you consider it includes health, education and infastructure. It wont start until 2007 and I dont think its a whole pile of money. Plus the private sector will be invovled for some of it.

The main problem in this country is not the money, its the system that delivers infastructure, things here are moving far too slow. The government cant even spend money on roads that it already allocated.

mike65

Latest Auditor Report

Now give them 140 billion more to play with.

Mike.

Maskhadov

What does that say ?

Sarsfield

Thomond Pk wrote:

That figure is truely frightening and would result in the National debt growing by over 300% just to give us only European norms in essential services.

If the cost of developing our infrastructure frightens you, the cost of not doing it should be terrifying.

It's about €10bn per year. That's manageable in the context of the size of the Irish economy.

Borrowing for infrastructure is responsible borrowing (provided it's spent wisely), as it's an investment in the future. And not all of the €140bn would come from borrowing I'd imagine - PPPs are likely to feature and some money may come from current spending (some of the €140bn would be spent anyway).

The rest of Europe didn't get their infrastructure for free.

But the C&AG should be watching progress carefully.

Maskhadov

from the indo

Will €140bn make us modern?
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http://www.unison.ie/irish_independent/stories.php3?ca=35&si=1482032&issue_id=13092

We should have no illusions about the chilling effects on the country's future economic growth of spending too much to make good the massive infrastructural deficit

THERE was a great hoo-ha, not so many years ago, when the consultants Fitzpatrick Associates calculated that it would take €25bn to fix Ireland's "infrastructural deficit".

It seemed an unimaginable sum. Surely it could not be right? If it were, the implication was that the deficit would never be closed. We simply could not afford that kind of spending. We have, however, spent all of that, and more, just in the past three years. We have had a fair amount of infrastructure, too, in fairness. There are a lot of new roads, the capacity of public transport has been greatly increased, especially in Dublin, and a lot of money has gone on the invisible but vital areas of water, waste and energy.

But the deficit still yawns, apparently wider than ever. The National Competitiveness Council ranks Ireland 13th out of 16 countries for perceived quality of infrastructure. Now, another set of consultants, A&L Goodbody, say it will take €140bn to provide what is needed over the next 15 years and bring the country's physical capital up to the standard that almost all of western Europe takes for granted.

One's first reaction is much the same as it was for that earlier report. Surely it cannot cost that much? For if it does, there seems little chance that such a vast sum will be raised and spent.

It is true that fifteen years is longer than the timeframe of Government capital programmes. But the annual cost would be higher than the present programme, which comes to an end next year. And the author of the report, Peter Brennan, believes that much of the spending is urgent, so that more would be spent in the earlier years than the latter.

He makes no bones about this, saying that the present financial "envelope" of 5pc of national income (GNP) devoted to investment should be increased to 7pc.

It sounds okay if you say it quickly. Think about it a bit longer, and it means €7 in every €100 of the nation's income would go to improving its infrastructure, from schools to power stations. That is national income, not government income. In terms of tax revenues, €20 in every €100 of taxes would go on the capital programme.

Mr Brennan is well aware that this kind of extra taxation, amounting to €2bn a year, will not be levied by any government. He says instead that the money could be borrowed, without threatening either the public finances or the more flexible EU rules on government deficits. Devoted readers will know that I agree with him there. If a project is worthwhile, and if it is being delivered in the most cost-effective way available, then there should be no reluctance to borrow.

We made awful fools of ourselves about borrowing 30 years ago, and the Dept of Finance is determined not to let us do so again. But if the Irish political system is so immature that it still cannot be trusted to operate a sensible fiscal policy, which includes borrowing for long-term investment, then the country simply will never reach its economic potential.

In the past, Finance officials preferred safety to success and have been excoriated by the verdict of history for holding back the country's development. The present generation of officials have to ask themselves where they stand.

This does not mean, however, that Mr Brennan is necessarily right about spending 7pc of GNP. He defended this huge investment by using exactly that phrase - that without a much improved infrastructure, Ireland will never achieve its full economic potential.

Undoubtedly, that is true. But the €140bn price tag raises the question as to whether the game is worth the candle. Ireland will also not reach its potential if the cost of the infrastructure is so high that the net benefit from installing it is negligible. As the financial jargon has it, the return on capital will be simply too low.

Nor is it just the actual return. Since the purpose is to make the economy more competitive, it must be judged against the returns achieved by our competitors. They already have the advantage of infrastructure installed 30 years ago, which has been paid for long ago. If their return on new investment is also better than ours, we are merely running to stand still. It is true that not running at all would mean falling ever further behind, which is not an option. But we should have no illusions about the chilling effects on future economic growth of spending too much for infrastructure.

The newly-opened Dundalk by-pass gives a simple example. The road cost €120m to build, which is high by international standards, but not grossly so. But the land acquisitions costs were €150m. That ratio does not exist in most EU countries, if any. The economic return on a €270m road is clearly an awful lot less than that on one costing €200m.

Roads are not the worst of it. One would like to see the Competitiveness Council trying to assess whether any of the rail projects being mooted, like the Metro and the east-west Dublin underground link, are worth building at all on the prices being quoted.

Those prices are a vast multiple of the costs in other countries. Although they would make life more comfortable for all concerned, the suspicion remains that, at those prices, they can add little to the country's economic competitiveness.

They will add even less benefit once long-term interest rates - the subject of last week's column - rise above their current historic lows. There is a real danger that, when that happens, and economic growth trending downwards towards rates of 3-4pc, the attempt to give Ireland modern infrastructure will simply be abandoned.

That would be a disastrous error. The best way to avoid it is to renew the effort to deliver projects more cheaply and to rank them properly in terms of economic and social gains. So far, the progress made on better contracts and delivery has been largely negated by the surrender to political pressure on land costs and spatial strategy.

Goodbody's solution includes more recourse to private finance and a central agency to manage all big projects of national importance. Private finance is not cheaper but, used properly, it can improve delivery and efficiency, which may make it cheaper in the long run.

There is, however, only one agency which can decide on strategic importance, insist on best international practice and, most importantly, put the national interest above private greed and local politics. It's called the Dept of the Taoiseach.

Maskhadov

That was a good article in the indo. I have to agree with some of it. My main gripe with this country is the lack of quality infastructure compared to other western European countries and the way we deliver infastructure.

Land costs on this peripherial country of mainland Europe are astronomicaly high. I dont know if we can ever change the mentality towards land here but a few things can certainly be done. One being a critical infastructures billl and a change of emphasis from the individual to the collective good of the people. Secondly is moving decisions away from politicans to a body which can deliver all the infastructure in this country.

What ever happened to the Critical infastructure bill

There seems to be a bottle neck in the system. The government seems to be always behind in spending when it comes to projects. They cant keep up with the spending to match the plan. If they intend to draw up a new €140bn plan then they are going to have to iron out all the hold ups or they can add on another 5-10 years to the plan.

Even if some projects cost so high it is still worth going ahead with them. For example the Luas and all its cost over runs. It is expected to make a profit in the next few years and the general public have the use out of it.

The other problem in this country is selecting the right solution to the transport problem and once its selected just get on with it. The M3 is shaping up to be another legal nightmare and no one can seemgly decide on how dublin airport should be best served by rail. It cant be rocket science like?

Victor

Maskhadov wrote:

What ever happened to the Critical infastructure bill

Maybe its not considered a critical piece of legislation?

D'Peoples Voice

Victor wrote:

Maybe its not considered a critical piece of legislation?

LOL, excellent line!

The National Pensions Reserve Fund which was set up by McGreevy, perhaps only 4-5 years ago, to provide pensions for our civil servants pensions was worth over EUR 13 billion at the end of June 2005.
http://www.nprf.ie
Not bad for 4-5 years work. (Yes the money is probably for those same civil servants who advised their ministers to go for electronic voting, and expensive payroll systems, etc.)

Anyway my point is that we could make up EUR140 bn easy enough over 15 years, if we repeat what we did for the National Pensions Reserve Fund, and that is sell off some semi-state bodies. Think of how much An Post could be worth, the ESB, Bord Gais, Bord Na Mona, Coillte, Aer Rianta(and Great Southern Hotel for which airport car park charges are being increased to keep afloat), Aer Lingus to name but a few. Of course, any unionists amongst us will have a heart attack at this thought. Ask Joe Public now if the government should buy back Eircom, Greencore/Sucra, Irish Life and Irish ferries/B+I ferres! How times change!!!!!

Maskhadov

Personally I dont think money is the problem. We can get €140bn together over 15 years without too much problems. As stated on this thread, we spent €25bn in a matter of a few years.

I'm in favour of selling off semi state bodies that are not of national intrest. But the Telecom Eireann / €ircon fisaco should be remembered. It shouldnt have been sold off. It it hadnt this country would be far more competitve in relation to broadband.

The main problem is the cost of land and the bottlenecks in the system for delivering infastructure. AFAIK the planning procedures in this country are overally democratic and it is slowing down everything.

Governments wont press ahead with major projects because they know its going to cause disruption and hurt them in the elections.

We need a critical infastructure bill because infastructure is critically needed. It has to be one of the most important peices of legislation a government should be trying to push through the Dail.

Maskhadov

is the government following this report ? it does seem as it is if you look at T21.