Opening remarks
President, members of the RICS and the Society of Chartered Surveyors Ireland, distinguished guests, ladies and gentlemen, I am delighted to be able to join you here this evening and to mark this special occasion and would like to congratulate the newly inaugurated President, Alan Collett.
I welcome the opportunity to address you and, in doing so, would like to give you an overview of the Government’s Capital spending plans and to also touch briefly on the current economic position and outlook and the broader public sector reform agenda.
Introduction/Overview
I know that the past few years have been especially difficult for the construction sector, as private sector investment has virtually ceased and Exchequer capital investment had been reduced to help restore balance to the public finances. We know that this is not ideal but we are all aware of the overriding necessity to cut our deficit in order to regain our national sovereignty and put ourselves in a position where we have more resources available.
Of course it’s not just a matter of cutting the Government deficit and downsizing the public sector. We also need to better target the scarce resources we have available. While there are challenges, we also now have an opportunity as a Government and as a people to put our public finances and the delivery of services on a more stable and sustainable path.
On economic trends…
I think it is worth making a few remarks about the current economic situation. The latest figures show that GDP grew for the first time in four years in 2011.
The external sector is leading the recovery, with exports of goods and services now well in excess of pre-crisis levels. This shows that the improvement in competitiveness, which has been evident in recent years, is standing to us. This, I believe, demonstrates the inherent flexibility of the Irish economy – prices and costs in Ireland have fallen significantly, and further improvements are in the pipeline. The strong export performance also means that our balance of payments with the rest of the world remained in surplus in 2011 for the second consecutive year and is expected to remain in surplus through the forecast horizon.
Obviously as a small open economy whose recovery is being driven by exports, we will be affected by the soft patch that the global economy is going through. However, the composition of our exports and the aforementioned competitiveness improvements will provide some support. Notwithstanding this uncertainty, I would emphasise that the majority of forecasters expect that Ireland will record positive GDP growth again in 2012.
Medium term prospects
Looking toward the medium term, the external environment is expected to strengthen somewhat from 2013 onwards, as is export growth. As this stronger export performance starts to feed through to investment and employment, consumer confidence is expected to return and the savings rate should start to unwind somewhat. So what we expect to see is economic activity beginning to gradually firm and broaden out - from being externally-driven to domestic demand also making a modest contribution.
Market sentiment towards us
I think it is also worth mentioning that market sentiment towards Ireland is improving. I understand from the fund managers who are marketing our Strategic Investment Fund that there is renewed interest in investment in Ireland and international funds managers are actively looking at the potential here. The yields on our Government bonds have stabilised and have been falling steadily since last summer. This is positive and encouraging and a vote of confidence in the steps we have been taking to stabilise the banking system and the public finances.
A significant step along that road being the deal struck by EU leaders in Brussels last Friday morning. A deal which provides an opportunity for Ireland to re-engineer the debt burden that is on our taxpayer and which ensures that Ireland will receive the same treatment as any other member state with difficulties. My Colleague, Minister Noonan, will advance Ireland’s position at the next Eurogroup meeting. The Tánaiste will ensure Ireland's Embassies throughout the EU will continue their work ensuring that Ireland’s position is clearly set out throughout the detailed discussions of the agreement.
Capital review
As you will be aware, last year I initiated a comprehensive review across all Government departments to identify expenditure programme savings and other reductions. Alongside this review, I also asked my Department to carry out a review of the Exchequer capital programme. This was to help us identify what critical infrastructure is required to best support economic growth and recovery, achieve the highest sustainable employment impact in the short to medium term, and to meet urgent and compelling social needs.
Planned Exchequer capital programme spend
Based on that review, last November I published the Government’s capital spending programme of over €17 billion for the next five years. This level of expenditure is based primarily on what we can afford. In that context, we have prioritised the investments that are most needed.
Our priorities as a Government are clear and are evident in the plan - in summary: jobs, schools and health. It is also based firmly on the fact that we are effectively at the end of a major phase of Exchequer funded capital investment. Over the past decade, some €70 billion was invested in infrastructure and the productive sector. Judged by a range of measures, the quality and quantity of the country’s stock of infrastructure has been considerably augmented in recent years.
The Society of Chartered Surveyors in Ireland, many of whose members are Chartered Surveyors of the RICS, have always had a significant role in the areas of policy, oversight and implementation of the public sector capital programme in Ireland. Their professional expertise and knowledge in the area of construction economics will be vital in ensuring that we derive the maximum benefit from the programme for infrastructure Investment.
Obviously, when I was discussing the Capital plan with my cabinet colleagues, we had to make some stark choices, focus on key needs and have had to delay or cancel some projects.
However, I was also keen to progress some worthwhile important and large infrastructure projects that have been planned for some time such as the new Children’s Hospital and the Luas interconnector.
Other infrastructure spend
Although our Capital Framework is primarily about allocations through the Public Capital Programme, the Government is determined to maximise the use of all available resources to promote economic growth and job creation.
The Government is pursuing an investment strategy, which brings together a number of strands of non-traditional funding, through NewERA and the Strategic Investment Fund. The SIF will seek additional commercial investment from private investors and target investment in areas of strategic significance to the future of the Irish economy.
PPPs
We will also continue to pursue the PPP approach to deliver public infrastructure alongside more traditional procurement, where it makes sense and offers value for money for the State. My officials are actively engaging with other Departments and Agencies to see what other projects might be pursued via this method. My colleague, Minister Noonan, has set up a group to look at sources of funding for such projects. This work is advancing well.
Proceeds from assets disposals
The Troika have agreed that half of the proceeds of our asset disposals programme can be used for re-investment in our economy. We are now considering carefully how this can be used to maximise the return to the economy.
Where the capital programme money will be spent
While the level of resources available to us does not match the investment of recent years, it remains the case that the Capital Framework sets out a significant tranche of investment over the next five years. It is designed to facilitate economic growth and build our social infrastructure. It will also see an increasing share of our scarce resources allocated to jobs, schools and healthcare facilities.
Schools…
We need to urgently deliver additional school places to meet population growth. We will be spending €2.2 billion for 40 New Schools and 180 other major School Projects.
Transport …
Despite the fact that we have nearly completed our major inter urban motorway network, we will be spending €2.9 billion on our national and regional road programme, including new PPP roads, motorway maintenance and provision for local and regional roads. We will also be providing €1.4 billion for the LUAS interconnection, Rail Safety and regional cities traffic management and removal of bottlenecks.
Water & Housing…
We need to continue to spend some €1.5 billion for Water Services and €1.4 billion is being provided for Social Housing Provision and some Regeneration schemes.
Enterprise & Jobs…
Creating jobs remains a top priority for Government. Accordingly, I committed €2.3 billion to the Department of
Jobs, Enterprise and Innovation. We are ensuring that our direct supports to industry will be maintained in excess of pre-recession levels when total capital expenditure was at its highest.
Summary
This represents a wide range of programmes and projects that will be funded over the next five years. €17 billion is still a remarkable amount of money, reflecting my priorities and those of the Government.
I am happy that the 2012 element of the programme is on track. The latest figures I have seen show that spending on most capital works is where we would expect it to be at this stage in the year.
Employment impact
It is important to note, and I am sure that most people here will know, that less expensive re-fit, refurbishment, and up-grade works such as school building and repair, or smaller local and regional road-works tend to be more labour-intensive than larger capital-intensive projects.
Action on Jobs in construction sector
However, the Government is keen to continue to provide supports for the sector and more than 23,000 people were working in Enterprise Ireland supported companies in the construction and timber sector during 2011.
Re-skilling
Forfás has been asked by the Government to prepare the Strategy for the Construction Sector. This process is now underway and initial discussions with relevant stakeholders including my own Department and the Construction Industry Council (CIC) taking place.
Training
On training, the Department of Education and Skills will review the apprenticeship model including costs, duration and demand with a view to providing an updated model of training that delivers the necessary skilled workforce to service the needs of a rapidly changing economy and ensures appropriate balance between supply and demand.
Valuer Registration Scheme
I welcome the initiative of the profession in introducing the Valuer Registration Scheme. I note its positive development for the profession, and its aim to provide assurance of valuation standards to markets and clients through the Red Book. I am happy to note that it meets the relevant international standards.
The members of both the valuation and financial services professions have had time to critically examine the way in which valuations were conducted before the turmoil of the recent financial crises struck. Ireland is no exception. Professions have to be ever-vigilant in holding their members to high standards and I commend you on your initiative in this regard.
Budgetary reform
On other areas of public spending, we need to ensure that we have a more robust decision making framework going forward. The Comprehensive Expenditure Review was a useful start but I do not want this to be seen as a once off exercise.
I am committed to implementing wide-ranging reform of the State’s budgetary architecture. A number of expenditure reforms being introduced will improve management of scarce public resources and tackle inefficiency.
Multi-annual budgets
The old annual Estimates process has been replaced with a modern, multi-annual framework which allows for full transparency about the allocations available to each Department over the coming three-year period. This will open the way for structural, medium-term planning and prioritisation within each area, with full public input and parliamentary oversight.
More detailed information on Government spend
My Department now publishes, in the Revised Estimates for Public Services, an unprecedented amount of information about what exactly Departments have achieved, and what they are aiming to achieve, with the public funds that are granted to them. It is not enough to know how much Departments are looking to spend. The public need to know what exactly is being delivered.
The Government is determined that every area of public service should be accountable for performance and results. This will apply to Ministers and their Departments, as well as to all Offices and Agencies.
Construction procurement reform
I am confident that the reforms delivered as part of the Construction Procurement Reform initiative underway in my Department will play a significant role in maximising the potential of this investment. Fixed-price, lump sum tenders have been sought since the introduction of the public works contracts in 2007 which has brought greater cost certainty to Government Departments and public bodies in administering capital budgets whilst ensuring greater cost control on the projects themselves.
Public Sector reform
As a public sector, we need to improve how we deliver services that meet our citizens needs where and when they are needed. Last November, I launched the Government’s comprehensive Public Service Reform Plan, which outlined key commitments and actions for change across the Public Service. I believe this to be the most ambitious and far-reaching reform plan since the foundation of the State. Containing some 200 specific actions with clear timelines centred around five central themes.
Under this Plan we are reforming how we manage people, how we are organised and how we manage expenditure. Progress is being made right across the themes set out in the Plan.
This is a huge endeavour, involving hundreds of different organisations and around 300,000 employees. The role of my Department is to facilitate, drive and support the reform process. We cannot micro-manage the delivery of change in each sector but we are taking the lead on key cross-cutting initiatives and enablers.
Public Service Agreement 2010-2014
The Public Service, or Croke Park Agreement as it is known, is a key framework which is enabling the Government to significantly reduce the cost of delivering public services and to fundamentally reform the way the public service works with the co-operation of staff.
One of the major benefits of the Agreement is that it is allowing us to do all of this in a climate of industrial relations peace and stability – a key building block on which to build a sustainable recovery.
Under the Agreement, fewer staff are working longer and harder, with flexibility and co-operation, to respond effectively to the greater demand for many public services during the current crisis. The public service is without doubt “doing more with less”.
However, the economic environment remains very challenging and more needs to be done to restore order to the public finances. We will have to look at more radical and innovative ways to deliver further savings, productivity increases and more reform over the remaining lifetime of the Croke Park Agreement. It will be essential that the provisions of the Agreement are used to their fullest potential.
Conclusion
This is a challenging agenda but I am confident that we have the capacity to deliver on it. I can assure you that we will continue to take the right decisions and that we can create stronger systems so that can avoid past mistakes happening again.
I want to thank you for your hospitality and would ask you to raise your glasses as I propose a toast to the RICS and its members.