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Capital spending to go up by €500m

Wednesday, 12th July, 2017 5:44pm

The Government’s Summer Economic Statement has revealed that capital spending will be increased by half a billion every year from 2019-2021.

Yesterday (Wednesday), the Minister for Finance and Public Expenditure and Reform, Paschal Donohoe published the Government’s Summer Economic Statement, and said the Government aims to balance the books next year.

This still allows an extra €500 million spending on roads, schools, hospitals and other major infrastructural projects. The Government is to establish a rainy day fund from 2019 onwards, with annual contributions of €500 million from the Exchequer.

The Minister also revealed that the amount of extra money, known as the fiscal space, for next year is estimated at €1.2 billion. Once new measures are taken into consideration, that means that there is an extra €500m for the Government to spend next year.

Minister Donohoe said: “The economy is growing at a healthy pace and generating jobs-rich growth. Indeed, we are now approaching a situation in which jobs are available for all those who want them. Now is the time to build on the gains of recent years, to improve the resilience of the economy and to address the capacity constraints that are emerging.

“We live in an increasingly uncertain world and must plan accordingly. To this end, the Government will maintain a rainy day fund, while at the same time increasing public investment. We will continue to reduce public debt in order to build up fiscal buffers.”

The increased capital investment from 2019-2021 is “to further develop our economic and social infrastructure so that we can better meet the needs of our people as our economy, and society, grows,” the statement said.

The increased capital spending “will enhance the competitiveness and resilience of the Irish economy” and will result in gross voted capital of nearly €7.8 billion in 2021. This will be 85 per cent higher than the €4.2 billion spent in 2016.

The change in emphasis of the rainy day fund, which was set up last year to insulate Ireland against future economic shocks, was defended by Minister Donohue on RTÉ’s ‘Today With Sean O’Rourke’.

“We have visible increased pressure on our public transport, housing and what we have to do in relation to climate change and I have to respond to that in the here and now. We face prospects and risks that would have looked impossible a number of years ago,” he said.

Fianna Fáil’s Finance spokesperson Michael McGrath told RTÉ Radio that his party would have retained the original plan to put €1 billion a year into the rainy day fund.

“It’s there as a buffer so that when we do hit rocky times again, that we will have resources to smooth out the management of those difficult economic challenges. The Government is talking about raiding a fund that hasn’t been set up,” he said.

When asked about projects like the M20, Minister Donohue said the Government would review the timings of those projects and whether “we can commit commit to new projects in the context of the ten year capital plan”.

IBEC welcomed the statement as an ambitious change in policy direction but CIF Director General Tom Parlon said that deferring investment in infrastructure until 2019 will consign the Irish economy to lower growth over the next decade.

“Whilst a commitment to increase infrastructure investment is welcome, waiting until 2019 to increase investment will consign many of Ireland’s regions to a decade of lost growth, exacerbate social inequalities and continue to see Dublin congest.

“If it’s a good idea to invest in 2019 to improve the economy and address the housing issue, lack of broadband and creaking road and rail infrastructure, why not start today?” questioned Mr Parlon.

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