What happened to collective responsibility?

 

According to yesterday's Irish Times, the Minister for Finance said that, in determining investment priorities, the Government and Ministers would reflect on the conclusions of the ESRI Review of the National Development Plan.

In order to clarify the Government's position on the report, I asked the Taoiseach's Department whether the Government at its recent meeting had taken decisions on the recommendations in the ESRI review.

This request was referred to the Government Information Service, who rang me back to say merely that the Government had "noted" the report, and had "taken a decision". The GIS official added that he was not at liberty to say whether the Government had, in fact, taken decisions on recommendations in the report.

What we all know, of course, is that after the report's publication, four ministers publicly criticised recommendations made by the ESRI affecting their departments - although one of them seems for some reason to have chosen to denounce as "absolute nonsense" recommendations about water, waste disposal, social housing and suburban roads that are not actually in the report as published.

Trying to make sense of this muddled scenario, I am led to the conclusion that at its recent meeting the Government did not in fact take any decisions on the recommendations in the report. Instead, the decision taken may have been to permit ministers to denounce parts of the report that they do not personally like - whilst at the same time the Taoiseach would say that this is "a good report", containing positive as well as negative points.

If this is in fact how the Cabinet decided to handle this report, it will not have won any marks for decisive government.

The Cabinet is, of course, fully entitled to reject, now or later, any of the recommendations made in this report, and it would be in no way surprising that a Government, after considering wider political issues, should demur at what it may see as some "counsels of perfection" given to them by economists. Governments may have legitimate social or other priorities that move them to give greater priority than economists will do to non-economic considerations.

What should not happen, however, is that individual ministers be allowed to pursue unchecked some of their more expensive hobby-horses. Decisions on public investment should all be Cabinet decisions.

Let me take up one issue that has been raised by this ESRI report. Back in 1997 the National Roads Authority produced a report analysing "the appropriate type of roadway for each segment of our National Primary and Secondary inter-urban road system, in order to cater for projected traffic flows over the 20-year period 2000-2019". A very thorough and, it would appear, scientific job was done in this report.

However in 1999, at the height of what might be called the "Mid-Celtic Tiger Madness", a non-expert Cabinet sub-committee which felt flush with money decided to upgrade some of our main roads to a higher status than would be needed during the two decades ahead - in particular building motorways, or in some cases dual carriageways, on segments of routes where such provision will not be needed until the 2020s or 2030s.

The Cabinet sub-committee seem to have felt that, by thus building ahead of need, they would be contributing to future economic growth. What they clearly failed to realise was that at the time they took this decision, excess demand in the construction sector had already started to push up costs dramatically. In the two years ended March 1999, skilled wages in construction had already risen twice as fast as industrial wages - by almost 20 per cent as against 10 per cent.

Whilst none of these additional motorways have yet been built, other unwise attempts by the Government to scale up construction activity faster than human and other resources can be expanded to meet such demand, have caused acute inflation in building costs. To give just one example: because of the labour shortage in construction during this recent four-year period, the hourly pay of unskilled building workers has risen almost twice as fast as that of workers in manufacturing.

It is because of the construction inflation caused by the Government attempting to do too much in too short a time, and also because Government contracts have contained built-in inflation clauses, that so many projects have recently far out-run their initial estimated cost. As a result, our whole public construction programme is now in some trouble, and will clearly not be completed as planned by the year 2015.

In these circumstances, the Taoiseach and the Minister for Finance should obviously give priority to cancelling extravagant road projects involving building segments of motorways that will not be needed for at least 20 years. It simply isn't good enough for the electorate to be told via The Irish Times that "The Minister for Transport, Mr Brennan is understood to be rejecting the call to consider downgrading the standards of roads on lesser-used routes earmarked for motorway standard. This was described by one source as a 'big issue' for Mr Brennan"!

It is also deeply disturbing that two-fifths of all houses being built, and half or more of those being built in certain counties, are second or holiday homes. Even if these are being built for as little as €100,000 each, this must involve an investment of something like €2 billion a year, more than one-tenth of our entire national investment.

The full cost of servicing these second homes is not being paid by their owners, but to a large degree is being borne by local and national taxpayers. And, as Cliff Taylor pointed out on this page yesterday, the huge volume of resources being devoted to non-essential construction of this kind pushes up the cost of social housing.

Whatever about the need for adjustments in some sectors, what is clear from the ESRI report is that overall our €7.5 billion public investment programme is yielding a high return - of the order of 14 per cent. As a country which less than 15 years ago had levels of per capita output and income 40 per cent below the EU average, but which in terms of these current criteria has now attained the same level as the rest of Europe, we still have a huge infrastructural leeway to make up.

In the current recession period, investment by the combined public and private sectors as a share of GNP has been falling back slightly from 28 per cent towards 26.5 per cent - but at the latter figure, our investment ratio remains much higher than elsewhere in the EU. We remain on the right path.