“Job creation is not a factor in the profiling exercise” Minister Brendan Howlin on why the government back-loaded the 2012 capital spend to the end of 2012
“There has been no Exchequer spend to date” Minister Brendan Howlin on the €2.25bn stimulus plan announced in July 2012
On the one hand, we have 309,000 unemployed people in this country which are included in the 430,000 of all recipients of unemployment related benefits on the Live Register. On the other hand, we have a backlog of reforms to government spending including consultants pay and working practices and the use of non-generic medicine in the health sector. Calculations by the Department of Finance suggest that €1bn spent on capital projects creates 10,000 jobs. NAMA says its €2bn planned expenditure will result in 25,000 new construction jobs and 10,000 associated jobs.
So it came as some surprise that this Government, at least the Fine Gael element of it, which had made job creation and protection “Point One” of its election camapaign “Five Point Plan” has arranged capital spending in 2012 so that a large part of it happens in the last three months of the year – 45% of the €3.6bn total annual budget is scheduled to be spent in Oct-Dec 2012. It was a related concern that the September 2012 Exchequer return revealed that we were only sticking to budget as a result of the deferral of €268m of capital spending – this at the same time as much-needed relatively cost-free reform is needed in our public sector eg 80% of the medicine used in this State is expensive non-generic compared to just 20% in our neighbouring jurisdiction, the UK. And it is a curiosity that three months after the announcement of a €2.25bn stimulus programme, nothing has been spent. What does this say about the priority of employment creation and protection?
Earlier this week, the Sinn Fein finance spokesperson Pearse Doherty asked the Minister for Public Expenditure and Reform Brendan Howlin about the surprise, the concern and the curiosity of the capital programme. Apparently no thought was given to employment creation when the 2012 capital programme was being planned and to the end of September 2012, there has been no spend whatsoever from the €2.25bn stimulus programme announced on 17th July 2012, and indeed there may not be any for some time as funding is dependent on action not yet taken or completed. The Minister does say that Departments are expected to make up the capital spend in the next three months
The full parliamentary questions and responses are here:
Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform further to Parliamentary Question No. 210 of 2 October 2012, if he will estimate the number of new jobs that would have been created if the 2012 infrastructure and capital spend budget, which to the end of August 2012 was underspent by €120m compared with profile, and to the end of September 2012 was underspent by €268m compared with profile, had in fact been spent according to profile..
Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform the consideration given to the creation of employment when the 2012 infrastructure and capital spend budget was profiled at the start of 2012 so that 45% of the total annual budget, amounting to €1.65bn out of an annual budget of €3.6bn, was to be spent in the last 25% of the year..
Minister for Public Expenditure and Reform, Brendan Howlin: I propose to take questions 110 and 113 together.
The profiling of capital expenditure is carried out by individual Departments on the basis of the likely timing of payments related to capital projects and programmes which they deliver. Job creation is not a factor in the profiling exercise. Queries in relation to the profiling of capital allocations are a matter for individual Ministers and their Departments.
In responding to the Deputy’s question however, I feel it is important to point out that a variance of around 12% in capital expenditure is not unusual. Despite such variances, over the last five years capital expenditure at end December has generally been back on profile with a variance of less than 2%.
While my Department is not responsible for the profiling of capital expenditure it does set the overall expenditure allocations of Departments which includes setting the five year multi-annual capital envelopes. The present five year envelope was outlined in the “Infrastructure and Capital Investment 2012-2016: Medium Term Exchequer Framework” which was published last November following a Government-wide review of the public capital programme.
There will, of course, be direct employment benefits in the delivery of the infrastructure proposed in the Investment Framework; however, it is important to note that the most important contribution capital investment can now make is in providing the capacity for the economy to grow, which will in turn create employment. In this context, the review made a point of protecting supports to the enterprise sector primarily through agencies such as Enterprise Ireland and the IDA. The unprecedented level of investment over the past few years and in 2012 delivered through the Enterprise Development Agencies can foster sustainable and valuable employment in the exporting sectors of the economy which will be critical to recovery.
Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform further to Parliamentary Question No. 210 on 2 October 2012, if he has produced plans with the objective of cutting the actual amount spent under the 2012 infrastructure and capital spend budget..
Minister for Public Expenditure and Reform, Brendan Howlin: The five year capital Exchequer framework was published in “Infrastructure and Capital Investment 2012-2016: Medium Term Exchequer Framework” last November. There are presently no plans to revise the capital Framework further.
The actual roll-out of capital expenditure is a matter for line Departments, operating within the delegated sanction arrangements issued by my Department that cover not only capital investment this year but contractual commitments for the next three years.
While capital expenditure was 13.6% behind profile at the end of September this is not unusual as, unlike current, capital expenditure tends to occur in large tranches at fixed milestones. Departments have not indicated any significant savings by year end and so I expect capital expenditure to fall generally within profile by that time.
Deputy Pearse Doherty: To ask the Minister for Public Expenditure and Reform if he will quantify the amount from the €2.25bn stimulus package announced on 17 July 2012, that has been spent and accounted for in the Exchequer statement at the end of September 2012..
Minister for Public Expenditure and Reform, Brendan Howlin: On the 17th of July 2012, the Government announced its plans for an additional 2.25 billion euro investment in public infrastructure projects in Ireland. The stimulus package comprises a new Public Private Partnership (PPP) programme which includes projects from the education, health, transport and justice sectors, and also additional Exchequer capital projects and other commercial and publicly needed projects.
As the Deputy will be aware 850 million euro of this funding is predicated on the receipts of the sale of State assets and the new licensing arrangements for the National Lottery. These funds are likely to be available in 2013 and 2014 onwards.
My Department and the NDFA are closely engaged with the relevant line Departments and their agencies to ensure that PPP projects are progressed promptly. It is expected that tenders will issue across the sectors in 2013 and 2014. There has been no Exchequer spend to date. Spend will occur as projects are rolled out with some project preparation spend expected in 2013. The bulk of funding for the PPP Programme will come from the private sector as private financing is a key component of the PPP procurement model.
Further information about the stimulus package and about the PPP projects is available on the website http://www.ppp.gov.ie.