NDP spending is 'failing' to meet demand

The Government should accelerate implementation of the next National Development Plan (NDP) to tackle worsening congestion and regional imbalances and, if necessary, undertake government borrowing to achieve its spending targets.

That is according to a Construction Industry Federation (CIF) submission on the plan due to be released to the public this week.

The submission, a copy of which was seen by The Irish Times, comes in the wake of another submission recommending the opposite approach. In a submission to be published in the autumn, the Economic and Social Research Institute (ESRI) is expected to call for the plan to be slowed down. Levels of annual spending envisaged under the plan, over € 9 billion, will threaten economic stability, according to the ESRI.

Mr Liam Kelleher, director general of the CIF said the pace of spending under the plan was failing to keep up with rising demand. "The present National Development Plan has done much to build a proper infrastructure, but in many cases need has run ahead of investment, and pressure points are beginning to be revealed. Unless a system of need analysis is put in place, Ireland will be playing catch-up in regard to its infrastructure," Mr Kelleher said yesterday.

Despite having less infrastructure than most EU member states, Ireland's capital expenditure has consistently fallen below a Government target of 5 per cent of Gross National Product (GNP), according to CIF figures. The CIF says that 5.5 per cent of GNP "plus significant private sector investment" will be needed to meet Ireland's infrastructure needs in years ahead.

"Unless Ireland can offer American and European companies a decent road, rail, broadband and energy infrastructure, the cost of business will simply become too high for them," Mr Kelleher said.

Of the € 57 billion allocated for spending under the first NDP, which ends this year, only € 44 billion had been spent by the end of last year. Under the next plan, due to be implemented between 2007 and 2013, the government is expected to spend around € 9.5 billion a year. But bottlenecks in the demand for labour and building materials will emerge and damage the economy unless the pace of spending is slowed to €8 billion a year, the ESRI believes.

According to the latest exchequer figures, Government spending on infrastructure was running €172 million behind schedule in the first half of the year. Department of Finance sources have attributed this to timing factors.

But Mr Kelleher rejected suggestions that the NDP was causing congestion in the building sector. "The latest survey of indicators for the sector shows no firms surveyed believing output is constrained by scarcities of labour or materials," he said.

According to the submission, Ireland's budgetary position now justifies speeding up the provision of infrastructure.