This is just one of the 28 country specific reports. The Commission consults widely and I attended one such consultation in December with the authors on behalf of the ETUC and made a presentation on Ireland.
It points out, as did TASC, that “Following a peak of 5.2 % of GDP in 2008, public investment fell to a low of 1.8 % of GDP in 2013 before slightly recovering in 2014. It was still well below the EU average. In addition, the crisis appears to have led to a structural shift in the composition of general government expenditure away from investment towards current spending.”
It also points out that “transport infrastructure, by far the largest component of government investment before the crisis, has been cut sharply, together with investment in housing. Other sectors, including education and health, were affected less severely, even though they were also cut.”
As we pointed out in the TASC report, investment fell to the lowest level ever since records began 50 years ago and did not even cover depreciation in 2013. In short, Ireland became a Banana Republic in that year, depleting public infrastructure. But in spite of that, the new plan Building on Recovery, set out an even lower investment spend in Year 1 of the plan - this year, 2016, at a mere 1.7% of GDP!
The Commission is quite damning of the new Plan. “This implies that the capital investment to GDP ratio would remain at historic lows of about 1.7 % in 2016 before marginally increasing to 2.0 % by 2021, well below the still depressed EU average of 2.9 % in 2013-2014. Capital expenditure would average only 6.4 % of the total in 2016-2021, thereby extending the crisis-driven reallocation of government expenditure towards current spending.” It appears as if they were listening as the figures are exactly the same as ours.
The Commission report calls for action on “housing, water services and public transport.” They are correct but some populists will not like continuing, or worse increased, public investment in water. Similarly the obsession with “off-balance sheet funding” of housing by governments through PPPs has to be abandoned. The financialisation of housing led to many bad outcomes, for many, including ironically, the banks. Direct provision is far more simple, efficient and far less costly in the longer run.
The report praises investment in roads, airports and ports but is highly critical of the low level of investment in public transport. While the LEAP card, real time apps and bus and tram and train stop information has greatly improved access to more modern buses etc., public transport in Ireland’s urban areas is still relatively poor, without a real connectivity within a whole system. And it is not cheap, by any standard.
It has improved and by a lot in my opinion, especially considering the low investment. But if climate change, connectedness and congestion are to be dealt with, a massive public investment programme is needed in Dublin, Galway, Limerick and Cork over the next decade or more. Here is what the report says on this for the capital. It can be funded directly with some of the proceeds of the banks, which may top €30bn over the coming years.
In the 2016 Election there was no serious focus on the need for investment in any party manifestos. This is deeply disappointing. The misuse of the word “investment” for current expenditure was a regular occurrence in many. But no party seems to have realised how deep the cuts in investment have gone and how weak the response in Building on Recovery was.
This EU report points out “Public investment in infrastructure typically has a potent short-term stimulus effect,” a point ignored or perhaps unknown by all Irish political parties in 2016.
Paul Sweeney is former Chief Economist of the Irish Congress of Trade Unions. He was a President of the Statistical and Social Enquiry Society of Ireland, former member of the Economic Committee of the ETUC, a member of the National Competitiveness Council of Ireland, the National Statistics Board, the ESB, TUAC, (advisor to OECD) and several other bodies. He has written three books on the Irish economy and two on public enterprise, including The Celtic Tiger; Ireland’s Economic Miracle Explained and Selling Out: Privatisation in Ireland, chapters in other books and many articles on economics.