In spite of its high-flown rhetoric on the need to prioritise the development of our roads system, the Coalition Government is failing to deliver on the promises made under the National Development Plan.
The Construction Industry Federation (CIF) yesterday identified four by-passes that have been put on hold for lack of finance, even though they were sent out to tender by the National Roads Authority some time ago. It claims that all new road projects this year are likely to be stalled for the same reason.
In calling for a rigorous review of the seven-year National Development Plan and for increased spending on the roads and waste management systems, the CIF is engaging in special pleading. But that should not disguise the reality that if this State is to take maximum advantage of the international economic up-turn, when it comes, significant improvements must be made to our infrastructure in the intervening period. The CIF has estimated that, in present circumstances, overall employment in the sector will fall by 10,000 in the coming year and output will fall by 3 per cent.
Economists have been warning for some time that National Development Plan targets in road construction would not be met unless increased funding was provided, because of cost over-runs. But, as the economy slowed dramatically in the second half of last year and the anticipated Government surplus crashed by €3.17 billion, the Minister for Finance, Mr McCreevy, would only undertake to meet construction spending targets rather than commit himself to the delivery of the promised roads system.
The present funding difficulties have their roots in construction inflation levels, which ran at 12 to 15 per cent during the first two years of the National Development Plan. And a campaign for higher compensation payments for land acquisition, run by the Irish Farmers Association, was estimated to have added (Euro) 250m to the overall cost, while delaying the roads programme by about a year. Even before the Government agreed higher compensation payments for farmers, however, it was estimated that costs on the roads programme had over-run by (Euro) 120m.
The CIF has argued that construction inflation has fallen rapidly in recent months as demand from the private sector contracted. Because of heavy investment in plant, personnel and systems, however, the industry still has the capacity to deliver growth rates of 5 to 10 per cent. It has urged the Government to invest heavily in infrastructure at this time - if necessary by borrowing - in order to take advantage of the spare capacity and low inflation levels.
There is some good sense in what the CIF suggests. But the Government would need to be satisfied that increased investment would not rekindle inflationary tendencies and underpin the very high profit margins that were enjoyed by the sector in the recent past. Value for money must be a key consideration.