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Government to announce €2 billion stimulus package

  • 17-07-2012 09:06AM
    #1
    Dave!
    Closed Accounts Posts: 27,856 ✭✭✭✭


    RTÉ

    Irish Times

    So the government is leaking some details about a stimulus package which is to be approved today, and announced in the afternoon.

    They've scraped together the money from various sources including the National Pension Reserve Fund, future sales of State assets, and the European Investment Bank.

    Projects in the package include: Grangegorman campus for DIT, schools, healthcare facilities, and roads.

    What do we make of this? Some critics are saying that this will only stimulate the economy in the short-term, and once these construction projects are completed we'll be back where we started.

    There doesn't seem to be anything in it to help SMEs, isn't that where the focus should be? Maybe they'll have something on this later when they announce it fully.

    Are there no initiatives that could be invested in which would see an actual return, or which would grow the economy in the long-term? Building roads is nice for the locals, but are the N17/N18 and N11/25 roads preventing businesses from settling in those locations or something?

    I would think the DIT campus and schools would be good investments in the future.

    These all sound like good things that should be invested in, but if the effect is just to create a load of short-term construction jobs (and the associated suppliers, etc), then it seems like a waste.

    Incidentally the ESRI warns against this, and thinks that any growth agenda should be taken at an EU-level.


«13456

Comments

  • #2
    whatstherush
    Registered Users, Registered Users 2 Posts: 666 ✭✭✭whatstherush


    Dave! wrote: »
    Are there no initiatives that could be invested in which would see an actual return, or which would grow the economy in the long-term? Building roads is nice for the locals, but are the N17/N18 and N11/25 roads preventing businesses from settling in those locations or something?

    Galway, now has no functioning Airport, the N17/18 will give a full motorway link to Shannon, which should be reachable in 30~40 mins when complete.


  • #3
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    Dave! wrote: »

    Projects in the package include: Grangegorman campus for DIT, schools, healthcare facilities, and roads.

    Most of these are already being discussed on infra/roads.
    Dave! wrote: »
    There doesn't seem to be anything in it to help SMEs, isn't that where the focus should be? Maybe they'll have something on this later when they announce it fully.

    There's no point in pumping money into sme's if they don't have (a) the workforce (DIT) and (b) the transport facilities to make and move their goods.
    Dave! wrote: »
    Are there no initiatives that could be invested in which would see an actual return, or which would grow the economy in the long-term? Building roads is nice for the locals, but are the N17/N18 and N11/25 roads preventing businesses from settling in those locations or something?

    Let's put it this way - on the N17 Claregalway is a massive bottleneck - makes Dublin traffic look like a picnic. There are all sorts of rat runs to try and get around it. It takes 60 minutes to travel between Galway and Tuam (about 20 miles) during peak times. On the N18, traffic stops if somebody is visiting a shop in Clarinbridge. The effect is that it makes people want to avoid the areas.
    Dave! wrote: »
    I would think the DIT campus and schools would be good investments in the future.

    Considering the consolidation of services that it will achieve this will probably end up paying for itself over 20 years.
    Dave! wrote: »
    These all sound like good things that should be invested in, but if the effect is just to create a load of short-term construction jobs (and the associated suppliers, etc), then it seems like a waste.

    The hope would be that these jobs will support other jobs etc. It will certainly provide a boost to the local economies in Galway, Dublin and Wexford, taking people off the dole generally gives a boost to the areas concerned.
    Dave! wrote: »
    Incidentally the ESRI warns against this, and thinks that any growth agenda should be taken at an EU-level.

    I take what the ESRI have to say with a pinch of salt due to the pronouncements they've made over the years often being proved wrong in hindsight..


  • #4
    Dave!
    Closed Accounts Posts: 27,856 ✭✭✭✭Dave!


    It'll obviously give a boost, but once the projects are complete won't we be back where we started?

    Is the hope that the global economy will grow in the next few years, and this will keep us going until then?

    Shouldn't we be investing in something a bit more sustainable? Not that I have any specific ideas :) Half these builders should probably be retrained

    The SME sector's main complaint these days is the lack of availability of credit, not infrastructure... Can't the government do anything to help this?


  • #5
    KyussBishop
    Closed Accounts Posts: 5,797 ✭✭✭KyussBishop


    I don't think the ESRI deserves much or any credibility any longer; incompetent forecasts before and throughout the economic crisis, and serious questions about their impartiality due to funding sources. They should be replaced with a more independent research institute.

    As for the stimulus: All well and good, at least if it goes into infrastructure it's well spent; any thoughts of injecting money into business though, should probably come after debt restructuring/writedowns, otherwise it's likely to be wasted without a corresponding increase in demand.


  • #6
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    Dave! wrote: »
    It'll obviously give a boost, but once the projects are complete won't we be back where we started?

    If nothing else happens...no. We'll be a small bit higher. If there's any kind of pickup, yes it'll make things a lot easier.

    Remember we're still at a competitiveness disadvantage. The easiest way to fix that is to make the regions more attractive, rather than trying to make Dublin cheaper - just look at the costs of living and getting around Dublin and imagine how hard it is to reduce those. Compare it to the cost of making it easier to have say a new medical devices factory in Tuam/Gort when this new road is built. It gives Galway some breathing space to deal it it's problems (transport, water, telecoms) - making the Galway region a bit more competitive and hopefully more prosperous. Bonus - it takes Galway people home from Dublin, reducing the pressure on Dublin's infrastructure - especially water.


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  • #7
    djpbarry
    Registered Users, Registered Users 2 Posts: 13,104 ✭✭✭✭djpbarry


    Dave! wrote: »
    Half these builders should probably be retrained
    While I agree with you in principle, I think expecting large numbers of unemployed builders to retrain is unrealistic.


  • #8
    Dave!
    Closed Accounts Posts: 27,856 ✭✭✭✭Dave!


    True enough, but I'm not sure what the alternative is besides permanent emigration, or the government propping up the construction industry with projects like this. It'll never be back to its previous level, so there are thousands of construction workers with no prospect of a job for the forseeable future.


  • #9
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    djpbarry wrote: »
    While I agree with you in principle, I think expecting large numbers of unemployed builders to retrain is unrealistic.

    Throw in the fact that there will always be a portion that are unsuited to work other than manual labour that is the real challenge we face as a country. How do we get suitable work for these people?

    Also throw in the possibility that the ones that can retrain easily will more than likely be among best at their jobs and we'd want to keep in that sector to keep the quality levels up.


  • #10
    djpbarry
    Registered Users, Registered Users 2 Posts: 13,104 ✭✭✭✭djpbarry


    Dave! wrote: »
    True enough, but I'm not sure what the alternative is besides permanent emigration, or the government propping up the construction industry with projects like this. It'll never be back to its previous level, so there are thousands of construction workers with no prospect of a job for the forseeable future.
    Yep, pretty much. Unfortunately, a bunch of youngfellas have grown up with the idea that one can put down roots and still work in construction - there'll always be something that needs building somewhere nearby.


  • #11
    Elessar
    Registered Users, Registered Users 2 Posts: 5,260 ✭✭✭Elessar


    How many jobs will this create?

    Directly...10,000, 20,000 in construction? Indirectly...who knows, but I can't imagine it will have any real impact on the 300,000 odd unemployed. It seems solely designed to create construction related jobs. What about those who have no construction background? Not everyone is a builder. Will the jobs created out of this really impact the economy enough to help deliver jobs in other areas?

    I don't think so. The return on investment here seems, at least to me, very small. What about other uses for that money? Put some of it aside and create another SSIA type scheme, to kickstart the economy in the next few years?


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  • #12
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    djpbarry wrote: »
    Yep, pretty much. Unfortunately, a bunch of youngfellas have grown up with the idea that one can put down roots and still work in construction - there'll always be something that needs building somewhere nearby.

    That's not as fanciful a notion as it appears to be. There's a lot of rubbish housing and office space that has been built over the past 10 years that's going to need maintenance or even rebuilding over the next few years. The trick with every industry is to hit the sustainable level. The only question I have with this (and I'm cringing thinking about it) is have we gone too early with it?


  • #13
    Dave!
    Closed Accounts Posts: 27,856 ✭✭✭✭Dave!


    Elessar wrote: »
    How many jobs will this create?

    Directly...10,000, 20,000 in construction? Indirectly...who knows, but I can't imagine it will have any real impact on the 300,000 odd unemployed. It seems solely designed to create construction related jobs. What about those who have no construction background? Not everyone is a builder. Will the jobs created out of this really impact the economy enough to help deliver jobs in other areas?

    I don't think so. The return on investment here seems, at least to me, very small.

    You would hope that the thousands who get jobs out of it will start spending it, and that will in turn give boosts to the retail and other sectors. The suppliers for the construction industry will benefit hugely also. Hopefully the increased economic activity will increase the tax take, and with the thousands leaving the dole the government will get a few quid out of it.

    I would think there's good potential for it to have a knock-on effect to many sectors. Hopefully the builders actually spend the money though and don't just use it to pay down debts etc...


  • #14
    Welease
    Registered Users, Registered Users 2 Posts: 3,834 ✭✭✭Welease


    Dave! wrote: »
    You would hope that the thousands who get jobs out of it will start spending it, and that will in turn give boosts to the retail and other sectors. The suppliers for the construction industry will benefit hugely also. Hopefully the increased economic activity will increase the tax take, and with the thousands leaving the dole the government will get a few quid out of it.

    I would think there's good potential for it to have a knock-on effect to many sectors. Hopefully the builders actually spend the money though and don't just use it to pay down debts etc...

    Does that really happen if the government is footing the bill for the total cost of construction (incl. higher wages than previous dole payments for each construction worker)?


  • #15
    turbobaby
    Closed Accounts Posts: 927 ✭✭✭turbobaby


    What people don't seem to realise in order for government to spend money on stimulus, they have to get it from somewhere else, i.e. they sell a state asset, take money from the private sector or borrow it to be paid back in the future with interest.

    None of the items leaked are income generating.

    So I am totally against it. The government takes money from one area of the economy and puts it somewhere else. The Irish government have a long, bloody history of wasting Irish people's money. When will this change? Never. So I'm against any sort of 'stimulus package' from the goons on Kildare Street.


  • #16
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    turbobaby wrote: »
    What people don't seem to realise in order for government to spend money on stimulus, they have to get it from somewhere else, i.e. they sell a state asset, take money from the private sector or borrow it to be paid back in the future with interest.

    One of the sources is the NPRF - which is money that's already there and "lying about" doing nothing for the economy. Another source is selling off parts of companies that don't deliver much value to the exchequer (e.g. Bord Gais pay a dividend of about €30m). If we were to get a good multiple of that and put it into capital spending, rather than using it to pay say some of the SW bill that's a proper use of the funds.
    turbobaby wrote: »
    None of the items leaked are income generating.

    Directly no, but the can be cost saving. The DIT one will pay for itself over time - they have 32 buildings spread across Dublin city that they have to have linked together with duplicated services in some cases.
    turbobaby wrote: »
    So I am totally against it. The government takes money from one area of the economy and puts it somewhere else. The Irish government have a long, bloody history of wasting Irish people's money. When will this change? Never. So I'm against any sort of 'stimulus package' from the goons on Kildare Street.

    If they were using this money to pay public servants or sw then it would be a waste. This will at least create jobs (less people on the dole) and hopefully allow companies to stabilise or grow (taxes, both direct and indirect as well as more jobs).

    Contrary to popular mythology we do need a construction sector - they're is a lot of maintenance work that is needed on buildings, so keeping people in work and their skills current is never a waste of money.

    The mantra "it's easier to get a job when you're working" has never been truer than it is today.


  • #17
    Sponge Bob
    Banned (with Prison Access) Posts: 25,233 ✭✭✭✭Sponge Bob


    Dave! wrote: »
    so there are thousands of construction workers with no prospect of a job for the forseeable future.

    In Ireland. There are opportunities elsewhere of course. We diverted far too much of our labour force into Construction from 1995-2008 and while we overcorrected since I cannot see half of the peak construction labour pool working here .....ever...again.


  • #18
    spank_inferno
    Closed Accounts Posts: 3,884 ✭✭✭spank_inferno


    Is this "Stimulus Package" just snippets from previous mothballed capital expenditure plans dragged back into the light?

    I always chuckle when I hear about DIT/Grangegorman.
    That was a 'done deal' back when I was attending there in 2001!


  • #19
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    spank_inferno wrote: »
    Is this "Stimulus Package" just snippets from previous mothballed capital expenditure plans dragged back into the light?

    While the projects are all pre-existing projects they're being fast tracked for funding that it looked like they wouldn't get.

    There was a bit of discussion about this on infra last November (finally dragged up a link). All the projects mentioned are in the 4 year plan. Gort-Tuam was slated for 2013 (under a full PPP), New Ross/Enniscorthy was parked and DIT was a fudning dream project.


  • #20
    Pride Fighter
    Registered Users, Registered Users 2 Posts: 5,727 ✭✭✭Pride Fighter


    Next budget will cut 3.5 billion, the one after that 3 billion.

    I welcome the stimulus, but wont there be still a mean contraction, even with the stimulus?


  • #21
    Bill Shock
    Registered Users, Registered Users 2 Posts: 49 ✭Bill Shock


    I see a road construction project in Wexford among the plans expected to be announced.

    What a surprise and an even greater coincidence given the home place of our pompous little Minister for Public Expenditure!! So much for a break from the past ways of doing things!!!

    Would have thought after Martin Cullen's reign that the South-east was more than well looked after.


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  • #22
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    Pride Fighter wrote: »
    Next budget will cut 3.5 billion, the one after that 3 billion.

    I welcome the stimulus, but wont there be still a mean contraction, even with the stimulus?

    This has been described in the media as "off the balance sheet" funding i.e. it doesn't appear in exchequer figures, so it's not as if they're taking money off DSP to pay for this.

    All the cuts that can realistically be made to the infra budget have already happened, so it'll be "efficiencies" in service provision that will be the target of the next set of cuts.

    That means shared buying, shared services etc, so the impact of the cuts won't be 3.5bn in wages (those figures also presuppose 0% growth, so the actual cuts will be different amounts as one rarely sees a flat 0), especially considering the €2bn infra plan.


  • #23
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    Bill Shock wrote: »
    I see a road construction project in Wexford among the plans expected to be announced.

    What a surprise and an even greater coincidence given the home place of our pompous little Minister for Public Expenditure!! So much for a break from the past ways of doing things!!!

    Would have thought after Martin Cullen's reign that the South-east was more than well looked after.

    Would you rather spend the money on consultancy and planning for projects that aren't "shovel ready" because there's a minster and the president from the two counties that happen to be benefiting?


  • #24
    4.legs.good
    Registered Users, Registered Users 2 Posts: 42 ✭4.legs.good


    1. cut billions from capital spending and kill existing plans (metro,t21) guys from infrastructure forum can provide exact figures over last few years

    2. lower government expenditure mainly due to 1. above while crook park delivers **** all

    3. announce "stimulus" which is just small portion of projects from 1. going ahead

    4. ??? (cut billions more in coming budgets once again focusing on capital spending)

    5. profit, get re-elected saying "see we stimulated"



    politicians....


  • #25
    4.legs.good
    Registered Users, Registered Users 2 Posts: 42 ✭4.legs.good


    antoobrien wrote: »
    This has been described in the media as "off the balance sheet" funding i.e. it doesn't appear in exchequer figures, so it's not as if they're taking money off DSP to pay for this.

    The NPFR kitty has been setup to save on future costs of pensions, this piggy bank has now been plundered for banks and now this (mind you this is better than giving it to banks)

    those pension obligations WILL APPEAR on the balance sheet when the time comes :( already the pensions bill has grown by leaps and bounds in the last few years of "austerity" as public workers are pushed out the door with generous incentives.


  • #26
    Sierra Oscar
    Moderators, Category Moderators, Computer Games Moderators, Society & Culture Moderators Posts: 8,790 CMod ✭✭✭✭Sierra Oscar


    This is to be welcome, it will be good for the economy and good for the development of infrastructure - that much is clear. However I firmyl believe that a more encompassing and bigger stimulus is needed.


  • #27
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    4.legs.good wrote: »
    The NPFR kitty has been setup to save on future costs of pensions, this piggy bank has now been plundered for banks and now this (mind you this is better than giving it to banks)

    those pension obligations WILL APPEAR on the balance sheet when the time comes :( already the pensions bill has grown by leaps and bounds in the last few years of "austerity" as public workers are pushed out the door with generous incentives.

    We're not spending it on roads/schools/.hospitals and expecting it to disappear, we're investing it.

    http://per.gov.ie/2012/07/17/speech-by-minister-brendan-howlin-td-government-infrastructure-stimulus/
    The State must pay for these projects through an annual unitary payment to the PPP company over an extended period (usually 20-25 years). It is envisaged that annual unitary payments associated with projects identified for delivery in Phase 1 will be around €140 million. However, unitary payments are linked to performance of the asset over its lifetime and the State will only make payments where the asset is delivered in line with the terms of the contract. Projects will be monitored closely to ensure that they meet all requirements as set out in the project contract.
    The NPRF will also be an important investor in this Phase 1 PPP programme and will decide on investment in individual projects in accordance with its commercial investment mandate.


  • #28
    CasaBonita
    Registered Users, Registered Users 2 Posts: 18 ✭CasaBonita


    Bill Shock wrote: »
    I see a road construction project in Wexford among the plans expected to be announced.

    What a surprise and an even greater coincidence given the home place of our pompous little Minister for Public Expenditure!! So much for a break from the past ways of doing things!!!

    Would have thought after Martin Cullen's reign that the South-east was more than well looked after.

    Yeah, like Martin Cullen brought so much to the South-East that we are the envy of the rest of the country!:confused:

    How about all the road infrastructure projects built during the boom in other regions? M7 to Limerick - Mid West, M8 to Cork - South, M6 to Galway - West. Then build a motorway to Waterford in the South-East (M9) and you have people up in arms saying the South-East is well looked after? The South-East currently has the highest unemployment rate in the country and I can tell you straight there is no-one in Government looking after us.

    I have been reading / posting on Boards for more than 10 years now and every time some infrastructure was announced for the South-East you had people crying parochialism and saying that the infrastructure was not needed, Cullen pulls another stroke and so on.

    Yet today a motorway project is announced for Galway (that get's more than it's fair share of Government investment) that goes from nowhere to nowhere and bypasses some small villages. Response on Boards.ie? Great, badly needed, about time etc. Get real, the south-east needs investment badly and I think that the projects announced for the south-east are of a far higher priority than the M17/M18.:cool:


  • #29
    antoobrien
    Registered Users, Registered Users 2 Posts: 6,106 ✭✭✭antoobrien


    CasaBonita wrote: »
    Yet today a motorway project is announced for Galway (that get's more than it's fair share of Government investment) that goes from nowhere to nowhere and bypasses some small villages. Response on Boards.ie? Great, badly needed, about time etc. Get real, the south-east needs investment badly and I think that the projects announced for the south-east are of a far higher priority than the M17/M18.:cool:

    Meh, the combined populations of Waterford and Wexford (the areas that will benefit) is about the same as that of Galway. Throw in the fact that Claregalway is competing with Adare for the honour of most congested village on a main route (20k vs 15k) and you'll see why so many people rate the West as being a higher priority.

    You also have to consider our parish pump is a bit bigger now:

    We have el presidente, you wouldn't want him on shocking bad roads would you?:D

    Also I'm surprised that nobody has spotted the Enda link in there - the N/M17 (whatever it will be) will have to go through Mayo, he'll want to see work on Tuam-Claremorris, Tobercurry to Knock & Collooney to Tobercurry schemes.:eek:

    Now if any of that goes ahead it'll be the biggest installation of parish pumps since the p flynn highway.;)


  • #30
    Chazz Michael Michaels
    Closed Accounts Posts: 1,822 ✭✭✭Chazz Michael Michaels


    A lot of detractors on here could do well by Googling 'demand-side economics' and having a read. For something more specific, try 'keynesian multiplier'. Fiscal expansion creates demand (well, it tends to).


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  • #31
    RichardAnd
    Registered Users, Registered Users 2 Posts: 4,132 ✭✭✭RichardAnd


    djpbarry wrote: »
    While I agree with you in principle, I think expecting large numbers of unemployed builders to retrain is unrealistic.



    Indeed. I recently read a comment over on the RTE news site wherein, the poster advised a unemployed construction graduate to "retrain to become a software developer." Whilst one is ever capable of changing careers, the belief that someone can simply retrain and start a new position in a reasonable amount of time is not wholly true. Advising someone to retrain as a computer programmer is akin to advising someone to retrain as a pianist. It doesn't seem very realistic, does is?


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