David McWilliams: State’s fiscal incontinence is deeply worrying

In the upmarket Johannesburg suburb of Rosebank, I sip a beer. This is an affluent place full of beautifully designed – but heavily-guarded – homes. “Bunkering” is what white South Africans call it.

When you are afraid of going out, you invest in your fortified “bunker”.

This is where you entertain friends, where your kids feel safe and where you can block out some of the more threatening realities of daily life in this teeming metropolis.

At a hipster bar called the News Cafe, people of various colours and creeds are glued to the TV watching the cathartic commission of investigation into the misuse of state funds.

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This story is dominating South Africa as President Cyril Ramaphosa’s government reveals the outrageous corruption that characterised the Jacob Zuma regime.

Day by day, judges scrutinise, in painful detail, how state funds were misused

For the ANC, this is a particularly difficult process as the entire movement is suffering with each new episode of wholesale plundering of the national coffers.

Day by day, judges scrutinise, in painful detail, how state funds were misused. Lucrative state tenders were manipulated by private contractors who offered low bids to get the contracts and then jacked up the prices, citing inflation and unforeseen costs, once the contracts were secured.

In South Africa the investigation is focused on direct involvement of the upper echelons of former President Zuma’s ANC, some of whose members siphoned off state money for their own cronies.

Only in Africa?

It would be comforting to reassure ourselves that this type of carry-on happens only in Africa. Yet it reminds me of the financial fiasco that is the national children’s hospital at St James’s.

It important to say that the corruption that defined the Zuma regime has not occurred in the Irish context. But the children’s hospital project has been the victim of other failings.

A combination of ineptitude, lack of oversight and insouciance at the highest level of our public service means that an outrageously cavalier approach to taxpayers’ money is being tolerated by the Government.

Who is looking out for the taxpayer here? Who is protecting our money and giving us value for money?

It’s not corruption, but it is a blatant failure of the process of public tendering.

In the case of South Africa, the issue is direct political involvement in the misuse of taxpayers’ money.

Here the problem is different, but the end result is the same: massive cost overruns and an assumption by all involved that the taxpayer will cough up.

How come the cost of a hospital that started at €400 million is now likely to be €1.7 billion? Who is looking out for the taxpayer here? Who is protecting our money and giving us value for money?

If the civil servants charged with costing and overseeing these State projects fail in their duty to protect the taxpayers, then something should be done about it – not just to protect the public purse but because prestige projects such as the children’s hospital set the standard for other public works initiatives, driving up the costs of infrastructure and driving down competitiveness.

With the State about to embark on building a Dublin Metro, the potential knock-on effect of this type of fiscal incontinence is worrying.

Let’s take a close look at the numbers, because it is your money that is being spent.

During the last coalition government, the cost of a new children’s hospital was suggested to be in the region of €400 million. This was clearly a back-of-the-envelope calculation, but it did form a basis for discussions.

Raised some concerns

Tenders were returned on October 21st, 2016. The lowest bid of €637 million received from BAM was very competitive, €131 million lower than the second-placed bid.

Maybe this should have raised some concerns that a bid could be so much below the second-lowest bid, given that both developers would have been pricing more or less the same manpower, administration costs, material and margins.

In April 2016, Leo Varadkar said the total cost of the project would be €650 million, including two satellite clinics, paying VAT, and contingency for inflation and unforeseen events.

Last December the total cost of the project had jumped to €1.73 billion.

Stephen Donnelly, the Fianna Fáil TD who has done much of the digging on this case, claims Irish taxpayers would be paying more than twice as much per bed for the hospital as it has recently cost to build the most expensive hospitals in the world: the Royal in Adelaide and the Karolinska in Stockholm.

But when the State is paying the bill, who shouts out for you?

In Dublin now both sides (politicians and those charged with delivering the project) are arguing over culpability.

But what should concern all of us is who represents the taxpayer in this blame game? At the moment it seems nobody does.

If a builder came to you and priced a job at €10,000 and then came back, having started the work, with lads on site, and told you it would now cost the guts of €27,000, you’d seek justification for every cent of price increase.

But when the State is paying the bill, who shouts out for you? The Government should be the last line of defence for the taxpayer. That is, after all, its job; it is the custodian of the country’s finances. If it doesn’t shout “stop”, who will?

Looted

We are not in South African territory, where the coffers were looted by those close to the president, nor am I suggesting that the contractors are forcing up the price.

Yet we end up in the same place, where the people who are employed to look after our interests don’t seem to care enough about the bottom line. Things slip. The fact that the government’s chequebook is the final payer is clearly part of the problem.

It’s hard to see what the other factors are. Materials and wage inflation have not doubled since 2016. In fact in the last year, as demand from China has weakened substantially, commodity prices – steel and glass, for example – have fallen, not risen.

Ask lads who work on sites whether their wages have skyrocketed, and they will laugh at you. Wage inflation in Ireland is running at under 3 per cent. It may be higher in construction, but it hasn’t risen 300 per cent.

So the cost overruns have come from somewhere else. I’d like to know where and you – the payer of the bill – should too.