Infrastructure budget hit to help keep up wasteful welfare spending

THE Government is to slash spending on major projects including road and rail because it is easier to sell politically than cuts in social welfare rates.

A secret memo on the capital spending programme to be announced on Thursday, and seen by the Irish Independent, shows ministers plan to cut at least €1.4bn over three years.

Roads, broadband, flood defences and science research are likely to be the hardest hit.

Significantly, Public Expenditure Minister Brendan Howlin warns colleagues it would be politically risky not to cut capital spending because otherwise they would have to take tough decisions on current spending in social welfare, public sector pensions, third-level grants and medical cards.

The memo notes that "any further concessions" on capital spending would involve "tougher decisions" on current spending, which contain a "much higher political risk". It adds that the cabinet must take this warning "on board".

This comes less than a week after Finance Minister Michael Noonan refused to outline proposed cuts in welfare, saying some details would be announced on December 1 before the Budget five days later.

While ruling out hikes in income tax, he admitted that carbon taxes and VAT would rise, along with the introduction of a property tax of €100.

The memo shows that by focusing spending on schools and healthcare, the Coalition hopes voters will be forgiving at the local elections in 2014 and general election two years later.

The memo reveals:

?The Government originally planned capital spending cuts of €770m. This has been reduced to €750m.

?There will be a move away from large-scale transport projects. Instead, the money will be spent on schools and health facilities.

?Cuts in social housing budgets are likely, along with a cut in funding for new water treatment plants.

?The huge investment in science -- almost €300m this year -- will be axed because of concerns that the State's return is "open to question".

But it adds that this area ''may be revisited next year if tangible employment benefits on a par with the scale of the investment sought can be evidenced."

Among the departments hardest hit will be Transport. Its allocation will fall from an expected €1.397bn to €1.221bn for 2012. Funding will fall to €900m the following year and less than €880m in 2014.

Much of its capital budget is earmarked for projects already built. Some €200m a year is needed to maintain roads, more than €600m is needed next year to repay the cost of the motorways and local authorities typically receive about €400m to maintain and upgrade roads.

This means there's nothing left for big-ticket items, including Metro North, the DART Underground, DART Airport link and Luas BXD -- the linking of Dublin's Luas network.

Other department badly hit on capital project spending include Public Works (down 17pc to €100m); Defence (31pc to €9m); Foreign Affairs (down 33pc to €4m); Justice (30pc to €56m); Arts (30pc to €42m) and Children & Youth Affairs (down 27pc to €8m).

The memo acknowledges the cuts will mean valuable engineering and construction expertise will be lost.