CAPITAL SPENDING/Analysis: Controlling capital expenditure remains a very serious challenge for 2003, writes Una McCaffrey
The electorate could be forgiven for treating yesterday's Estimates with a good dose of scepticism. If nothing else, the current state of the public finances has made them very familiar with missed targets and massive overruns in expenditure.
Next year's goals for capital investment are ambitious. The overall capital budget will shrink by €328 million, or 7 per cent on the expected outturn for 2002. A total of €5.3 billion will be spent on projects such as roads, trains and sewerage plants, with the second-largest allocation - €1.5 billion - to go on transport. Other significant spending areas will be roads, housing and education, with all of these to be hit by spending cuts.
At least this is what the the Estimates tell us. What will happen in reality is a bit less certain, as has been demonstrated in dramatic fashion over past months.
The Estimates for 2002 promised that capital spending growth would be 14.7 per cent this year.
While the success of the Government's efforts to stay within this limit cannot be fully judged until the bells chime for 2003, the indications have not been good. At the end of September, for example, spending growth was running at 20 per cent, well above the goal.
The Minister for Finance, Mr McCreevy, was adamant yesterday that the original target remained achievable, but few were interested in asking how this could be so. The focus has now moved on to 2003, and the spending problems that it will inherit.
Cuts will be implemented almost everywhere they can be made, with almost all capital spending projects suffering some pain. "We must cut our cloth according to our means," said the Minister, using one of his favourite metaphors of recent weeks.
A quick look at last December's Budget document shows exactly how many stitches must be unpicked. At that time, Mr McCreevy said that the Government would spend €7.2 billion on capital investment in 2003. One year later, that amount has shrunk by a massive 26 per cent. A cynical observer might say that this illustrates just how much infrastructural development and - more particularly - the National Development Plan - has slipped in the list of current priorities.
Just last week, the Government-funded think tank, the Economic and Social Research Institute, reiterated its warnings about "stop-go" capital investment.
It is not without significance that yesterday's projections were met with something approaching fury by the builders' group, the Construction Industry Federation. Noting that investment in road-building was to be more or less static on this year, the Chambers of Commerce of Ireland last night predicted that the 23 major national roads projects awaiting funding will not start in 2003.
As well as roads, hospitals and schools will also be subjected to severe spending restraint.
Behind all of this cloth-cutting of course lies speculation on how achievable it might be. After all, spending restraint has hardly been the theme of the last year, despite pressing needs. Can Mr McCreevy meet his goals this time?
He was, chastened statements aside, in defiant mood yesterday, assuring his audience that his targets would be met. As usual however, details on how this could be guaranteed were not provided, with the only indicator of the new regime coming in his assertion that all Departments would have to work within initial allocations. In other words, no additional spending would be provided in the middle of next year, as occurred in 2002 for Departments such as Health and Transport.
Aside from this however, speculation will remain exactly that, at least until December 4th, the date of the Minister's next budgetary instalment.