Briefing Paper 3 – Position on Infrastructure Investment

Ian Carey News, Submissions

Position on Infrastructure Investment – Spending and investment priorities for the future

Spending and investment capacity for the foreseeable future is going to be extremely limited with restriction on Government capital expenditure. There is particular need to ensure that future investment decisions in transport and energy are strategically considered and are based on principles of optimum long-term decarbonisation.

We note a report in Today’s Irish Times (6th May) that the Construction Industry Council is proposing “Under a detailed plan devised by the Construction Industry Council (CIC) and submitted to Minister for Finance Brian Lenihan in the run-up to the supplementary Budget, Irish pension funds would invest in a State infrastructure bond that would provide much-needed finance for the building of roads, railways, schools, hospitals and utility projects.”

The idea of using private pension funds and Government bonds for infrastructure is entirely appropriate. Indeed it is the most effective means of advancing investment in renewable energy and energy conservation. It was recommended by a UK speaker at a Feasta seminar a few months ago. The New Economics Foundation in UK has published a document (see their website http://www.neweconomics.org) on a Green “New Deal” setting out the priorities and strategy of such investment with decarbonisation and renewable energy being top of the list.

We are also in support of the application of the scheme to schools, hospitals and sewerage schemes, but are concerned this is all about the big engineering construction firms being able to continue to build roads.

1.   Use of PPP for Further Road Projects

We note that the National Roads Authority have changed the funding mechanisms to be put in place for a number of road schemes, including the New Ross by-pass, the N11 Enniscorthy by-pass – which are both major sections on interregional motorway – and the Gort to Tuam motorway, using Public Private Partnership instead of direct capital grant. Unlike other sections of roads, such as the M3, which have been subject to PPP funding, there would not be a potential toll income on these routes to achieve a comparable level of private investment. This means that any PPP for these roads would be borrowing in another name.

There is a major deficiency in cost benefit analysis on PPPs. The main research into PPPs is being carried out by the Department of Economics at the University of Limerick, coordinated by Dr Eoin Reeves, who is director of the privatisation and PPP research group.

A summary of his research findings in The Irish Times on 21st April 2008 is critical of the lack of objective evaluation and value for money criteria in undertaking PPPs.

2.   Current conflict between the Department of Transport Published Policy and schemes proposed for funding under Transport 21

Future investment should be the achievement of decarbonisation and decongestion through the objectives and actions set out in Smarter Travel – A Sustainable Transport – A New Transport Policy for Ireland, 2009-2020.

This may be summarised as follows:

  1. Future population employment growths will predominantly take place in sustainable compact forms which reduces the need to travel for employment and services;
  2. 500,000 more people will take alternative means to commute to work to the extent that the total share of car commuting will drop from 65% to 45%
  3. Alternatives such as walking, cycling and public transport will be supported and provided to the extent that these will rise to 55% of total commuter journeys to work
  4. The total kilometres travelled by the car fleet in 2020 will not increase significantly from current levels.
  5. A reduction will be achieved on the 2005 figure for Greenhouse gas emissions from the transport sector.

There is now a direct and irreconcilable conflict between the stated Department of Transport policy to, in effect, cap the total kilometres travelled by the car fleet at current levels and the further road projects contained in Transport 21.

3.   Continuing Funding of Interregional Motorways under “Transport”

While there is a need for addressing bottlenecks and congestion in Irish urban centres, such as New Ross, the continuing motorway investment proposed from Rosslare to Waterford and the Atlantic Corridor Route contained in Transport 21 has not been subject to any form of economic cost benefit analysis, let alone strategic environmental assessment under the SEA Directive. Regardless of potential funding mechanisms used, the continuation of this scale of road building would be a misdirected use of resources, creating a debt burden if PPPs are used, or an inappropriate use of the national pension reserve fund.

Particular arguments put forward by the Construction Industry Committee to proceed with large-scale road schemes as a means of generating construction and employment. This does not address the reality by which schemes currently under construction, such as the M3, are being carried out by major multi-national consortia, with significant non- Irish labour, as a result of the operation of a highly competitive tendering process, based on EU procurement rules. There is no evidence that any significant new road building projects would have any impact on current unemployment levels in the construction industry.

In particular, there is a very telling comparison to make between a road scheme and the employment as well as the energy conservation benefits of an investment scheme for energy retrofitting of the housing stock which would benefit small builders at local level across the country, as well as achieve a long-term economic and energy conservation benefit.

It is essential that spurious employment arguments are not used to justify further large- scale road schemes, directly contradicting Department of Transport policy. Priority identification is required of locations where small-scale by-pass investment is required. There is a particular concern that long planned by-pass routes for urban centres such as New Ross have been deliberately abandoned in order to generate the local political and business lobby pressure for by-passing through alternative large-scale interregional sections of motorway presented in the guise of by-passes.

4. Dublin Metro

It is now possible to look with hindsight at the failure in Irish strategic planning which occurred in the development of the Greater Dublin Area, in particular, from the mid 1990s, at the beginning of the boom. There was a clear potential for Dublin with proper strategic planning to develop on the European capital city model on high density public transport corridors.

The Strategic Planning Guidelines for the Greater Dublin Area 1999 set out the principle of nucleating new development along transportation corridors with primary emphasis on public transport accessibility. This strategy was almost entirely disregarded by counties Meath, Kildare and Wicklow and did not address the level of car-based sprawl that developed in the counties surrounding the GDA. The mechanisms for implementation of the Strategic Planning Guidelines through the establishment of the Dublin Mid East Regional Authority and the Dublin Transport Office (DTO) proved entirely ineffective.

The result is that major proportion of the new development over the last decade has been in locations contravening the provisions of the Regional Planning Guidelines. Adamstown and Pelletstown are very much the exception of large-scale new residential developments linked to the provision of new railway stations on the orbital routes.

The opportunity has been lost, particularly on the Metro West route, for financial contributions from new development to fund rapid transport. Passenger demand in Dublin is actually currently declining, with particularly significant figures for the airport.

The combination of sprawl housing and business park in locations outside the public transport corridors undermining the strategy, along with the current downturn, place a serious question on the viability of Metro North and Metro West as well as LUAS extension investment.

An Taisce has been carrying out detailed cost benefit analysis showing that investment in quality bus rapid transit on the model of French cities, such as Rouen and Nantes, is the most sustainable and appropriate transport investment priority for Dublin to achieve a modal shift from car to public transport and reflect the reality of a sprawling, polycentric, urban conurbation.

5.   Energy

While the Department of Energy, Communications & Natural Resources is proposing the achievement of 40%+ renewable targets by 2020, and Eirgrid is proposing major grid upgrade as well as north-south and Irish Sea interconnection to maximise and distribute renewable energy capacity, there is no evidence that the required strategy is in place to ensure that the provisions of renewable energy required will be in place. This renewable energy target can only be achieved by a large-scale, on-shore and off-shore distribution of large-scale wind energy proposals.

In the interim, current international fall in oil and gas prices is leading to an unsustainable level of proposals for base-load combined cycle gas turbine (CCGT) plants at various stages of the planning process by Bord na Mona, Bord Gais, Endessa (which has taken over ESB oil plants at Great Island), the Quinn Group and others. These are based on short-term economics and do not address long-term security, cost or supply source of natural gas, given that Corrib, when it comes on stream, will only supply up to 40% of the Irish gas market, only for a ten year period before peaking and declining.

6.   Appropriate and Inappropriate use of Irish Pension Funds for Inftrastructure

The front page story in the Sunday Business Post on the 19th April 2009 referred to lobbying by the “Construction Industry Committee, an umbrella group of builders, architects and surveyors” for use of pension funds for PPP projects. It was stated that “Officials from the Department of Finance are having high-level discussions with representatives of the Irish pension industry about the plan, which would significantly reduce the state’s own funding exposure on capital projects.” The use of pensions funds for road schemes would be entirely inappropriate.

Any consideration of the investment of Irish pension funds in infrastructure by the Government should be with a view to renewable energy investment, which will provide long-term energy supply security, reduction in climate emissions and reduction on dependence on imported fossil fuel.

Consideration is also required of fiscal measures to incentivise the retrofitting of the national housing, commercial building stock in view of the long-term benefits in emission reductions.

Contact information:

For further details please contact Michael Ewing, Social Partnership Coordinator.

Postal Address: Environmental Pillar of Social Partnership. 10a Camden Street Lower, Dublin 2

Telephone: 01 4054834

Mobile: 00353 (0)86 8672153

Email: michael@environmentalpillar.ie

Skype: michaelk.ewing

Ian CareyBriefing Paper 3 – Position on Infrastructure Investment