Spending on infrastructure, such as roads, railways and airports, is awashwith cost overruns and has contributed to public spending going out ofcontrol, suggests Sean Barrett
Growth rates of 21 per cent in current Government supply services and 27 per cent in voted capital expenditure cannot be sustained from 4 per cent growth rates in the economy as a whole. Weak expenditure controls grew apace when the Exchequer was "awash with money." The problems were compounded when tax cuts by Charlie McCreevy which still allowed for a large Government surplus were condemned by EU Commissioner Pedro Solbes.
Public expenditure control had grown lax in the years when it appeared that we faced no expenditure constraint. The Comptroller and Auditor General has expressed serious concerns about efficiency in the infrastructure sector, but in heady times his concerns went almost unreported.
The infrastructure sector is not delivering. The record is one of cost overruns, grandiose projects, sloppy studies of benefits and minimal checks to see if benefit hyperbole results in a positive return afterwards. The infrastructure appears to be living in a fool's paradise at the expense of the rest of the Irish economy.
The success of the Irish economy is based on low taxation, rewards for work and entrepreneurship and improving competitiveness.
When sectors such as health and infrastructure become uncompetitive they place at risk an overall economic strategy which has made Ireland the success story of the OECD with the best job-addition record and the lowest unemployment.
Indeed, the infrastructure industry was criticised by the Finance Minister, Charlie McCreevy, at a recent regional assembly in Portlaoise. He asked searching questions about our burgeoning infrastructure spend. The evidence supports him.
The Enfield bypass, opened on April 12th, cost €11 million for 2.58 kilometres. It is a relatively modest road, but at €4.3 million per kilometre it costs 75 per cent of that of a motorway as estimated in the National Roads Authority Road Needs Study.
The modest Enfield bypass will carry 20,000 vehicles a day compared to 55,000 capacity for a motorway. Per unit of capacity the Enfield bypass is more than twice as expensive as envisaged in the Road Needs Study. Readers of The Irish Times were informed on April 4th that since 2000 the cost of the Fermoy bypass has doubled from €80 million to €154 million.
The Comptroller and Auditor General's value-for-money audit of the roads budget (March 1999) found that "many of the cost estimates were poor".
He found that 32 projects already had a cost overrun of over £180 million even though several were still incomplete. On the benefits side he found that "the National Roads Authority is not in a position to easily monitor or evaluate the extent to which the expected benefits are delivered because it does not formally record the target benefits of individual projects."
When we understate the costs and don't record the benefits, the cost-benefit analysis becomes worthless.
The road budget problems were compounded when the Road Needs Study was discarded in favour of a more expensive motorway system linking the main cities with Dublin. A motorway has a capacity of 55,000 vehicles a day.
By building a motorway between Cahir and Mitchelstown you create 55,000 spaces a day in addition to the 20,000 on the present alignment. This is almost four times the 2019 predicted volumes on the route. It is 14 times the traffic count of 5,463 vehicles a day south of Cahir in the 1999 traffic-counting programme.
In The Irish Times on April 4th, Senator John Dardis raised the issue of the Waterford motorway. This has a capacity of 55,000 vehicles a day for a route with 1999 volumes as low as 2,879 at Gowran and 9,581 at Crookstown. A standard two-lane road costing €1.8 million per kilometre is sufficient for these traffic volumes and costs less than a third of the motorway cost of €5.7 million per kilometre.
The NRA Review of 1999 and Outlook for 2000 contained the following estimates of time savings for the years 1994-99 in minutes for end-to-end journeys: Border-Dublin 13.5 minutes, 48 per cent of target; Wexford-Dublin 13, 108 per cent; Limerick-Dublin, 17.2, 52 per cent; Cork-Dublin 26.1, 65 per cent; Sligo-Dublin 44.1, 110 per cent; Galway-Dublin 24.8, 191 per cent.
The results indicate the highest absolute saving on the Dublin-Sligo route at 44.1 minutes and the best exceeding of the target, by 91 per cent, on the Dublin-Galway route. You can take a BMW to the BMW region faster then ever.
The targets for 2006 are to add the following time savings from Dublin: Cork, 58 minutes; Limerick, 31 minutes; Waterford, 31 minutes; Galway, 36 minutes; and to the Border, 24 minutes.
In the major mainline rail investment project completed most recently, the Dublin-Belfast project costing €238 million, the object was to cut the journey time to one hour and 30 minutes. Eight of the nine services from Dublin to Belfast per day take two hours and five minutes, not much faster than the steam trains of 50 years ago.
There is nobody in either government asking where the time savings promised are when this project was pushed through the exchequers of Belfast, Dublin and Brussels.
The €17.78 million rail signalling project rose in cost to €63.48 million.
The 257 per cent cost overrun could not be investigated by the Oireachtas because of the High Court decision in the Abbeylara case. The €14.6 million spent to date includes €7.62 million paid to consultants.
In Connacht at 2 p.m. daily there are only two passenger trains running. One is at Boyle and the other at Claremorris, and there is no train at that time on the Athlone-Galway section. Since Boyle and Claremorris are over 40 miles apart no electronic signalling is needed. No road engineer has proposed traffic signals on roads with three or four vehicles a day in each direction. It is regrettable that the Oireachtas could not evaluate why electronic signalling was sought on such sparsely-used rail lines.
The large investment in doubling the track between Clonsilla and Maynooth and in buying 20 diesel railcars to serve the route has resulted in one extra train in the morning peak to Dublin and no extra service for returning commuters.
Since the Sligo evening train now runs non-stop to Mullingar it takes longer on an evening train to north Kildare and south Meath than before the large investment in the double track and the 20 railcars was made. Based on the current timetable of 18 trains a day on local services between Dublin and Maynooth the 20 new railcars bought for the service are performing less than one round trip a day each.
The Annual Report of the Comptroller and Auditor General for 2000 on transport infrastructure spending in the Greater Dublin area was informed by the Dublin Transportation Office that "while the overall target was established using the model, the small-scale impacts of the individual elements of the plan cannot be modelled with sufficient precision to allow it to be used as a monitoring tool."
The Comptroller concludes that "in the circumstances it is not possible to determine the extent to which the primary objective of the plan has been achieved." (p51).
"The DTO did not focus on the effect of the actions in the plan, and there were no significant re-evaluations of the inputs to the plan in the course of its implementation . . .
"The DTO used computer modelling techniques in drawing up the plan and the target impacts for correcting the transport imbalance. Consideration should have been given to the use of such techniques in the course of the plan to determine whether and to what extent target impacts were being achieved."
The expenditures on traffic management, roads, rail, etc in the Dublin area which the Comptroller was seeking to evaluate were some £134.5 million between 1998 and May 2001.
Freight has been deserting the railways, too, for the deregulated road freight sector. Passengers have no such luck because the Department of Public Enterprise has a position of hostility to the independent bus sector in denying it licences and confining the €400 million annual transport subsidies and investment grants to CIE.
The Competition Authority reported last summer that the protected position of the CIE group by the Department of Public Enterprise cannot long survive the court decision in the taxi deregulation case. Recent advice from the Attorney General appears to confirm this view. Since buses and bus lanes are a highly efficient use of infrastructure the economic returns will be large.
Last August the aviation regulator disallowed £726 million of a £998 million capital investment programme proposed by Aer Rianta on the grounds that it was not justified. The matter goes now to judicial review.
The roads, airports and railway examples illustrate the hollowness of mindless calling for more investment in infrastructure. Infrastructure must be the subject of proper analysis and made to pay its way. Expensive, overdesigned roads, railways and airports add to either the tax or debt burdens and obstruct rather than cause economic growth.
The infrastructure sector is a major contributor to our public spending problems. Project appraisals and expenditure controls are weak. The sector could happily consume all the fruits of the boom and still ask for more. To protect full employment the sector will be asked searching questions by the Minister for Finance very soon after the election.
Sean Barrett is Senior Lecturer in the Department of Economics at Trinity College, Dublin