The Government should introduce tax incentives to encourage the private development of public infrastructure at key locations identified in the National Spatial Strategy, argues Martin Whelan
Tax incentives are needed to encourage infrastructure development in the gateways and hubs designated under the National Spatial Strategy (NSS).
The new gateways or regional cities - such as the proposed new city incorporating Athlone, Mullingar and Tullamore in the midlands - require huge investment in transportation, education, health, water and waste management, and cultural infrastructure. The scale of the required infrastructure investment is so great it will not be forthcoming unless private investors can be incentivised through the taxation system.
In order to achieve the critical mass, in population and services terms, required to make them significant centres from the point of view of regional development, the new cities - like Athlone/Mullingar/Tullamore, Dundalk, Sligo and Letterkenny - need a population in excess of 100,000 people, national or regional third-level centres of learning; large clusters of national/international scale enterprises; dramatically improved transportation links; a city level range of theatres, arts and sports centres, public parks and cultural and entertainment quarters; city scale water and waste management services and much more.
Put simply, these urban centres must provide the full range of services associated with internationally competitive cities, such as Dublin.
By focusing incentives on the provision of this essential infrastructure, the state can ensure the achievement of its aim of balanced regional development and enhanced national competitiveness.
Tax incentives for property development have already been used successfully in Ireland to promote regeneration throughout selected parts of the country. They have, in consequence, made a huge contribution to the physical, economic, social and cultural fabric of cities, towns and villages throughout the country since their introduction in the mid-1980s.
However, the Irish economy has changed significantly since the first tax incentives were introduced in the mid 1980s. The new challenge is the achievement of regional balance.
Without it, up to two-thirds of the country's population increase over the next 20 years will occur in Dublin and the surrounding counties.
Many other parts of the country will experience little or, in some cases, no population increase. So while existing problems in Dublin, such as congestion, will increase, other parts of the country will see essential services denuded in response to demographic stagnation. The main loser will be the national economy.
The NSS recognises this and identifies those parts of the country that can be built up to support regional development. However, the NSS is a paper exercise and nothing will be achieved without investors putting their faith in the state's grandiose plans.
Time is a crucial issue also. While the "predict and provide" approach it seems has been the bedrock of investment decision-making in Ireland, perhaps understandably in straitened fiscal circumstances there is now a compelling case for investment in infrastructure up front.
Infrastructure will attract people to live and work in the new cities. The risk associated with this from an investor's standpoint is so enormous, however, it will not be achieved without the aid of some form of taxation incentives and, even then, the risk will remain great.
The Government is currently reviewing the future of taxation incentive schemes, which are due to come to an end in July 2006. It must realise that the centrepiece of its policy platform, the NSS, will gather dust in some state office over the next 20 years unless it actually does something to ensure its implementation. Targeting tax exemptions and reliefs towards the new regional cities would be a significant start.
To ensure value for money, the new tax incentives should be guided by master plans involving co-operation between the spatial planning section within the Department of the Environment, Heritage and Local Government, and the regional and local authorities.
These plans should identify the infrastructure requirements of each of the new cities, and also the infrastructure requirements in the development hubs, such as Kilkenny and Wexford, that are expected to play a supporting role for the regional gateways.
If the Government fails to recognise the role that tax incentives can play in encouraging regional balance and instead abolishes all tax incentives for property development, as has been suggested, a huge opportunity will have been lost and the likelihood of regional balance greatly reduced.
Martin Whelan is executive for the eastern region at the Construction Industry Federation
The IHBA Convention 2005 opens today in Killarney
