Speeches

Speech by Minister for Transport, Tourism & Sport Leo Varadkar at the Construction Capital Spend Conference in Dun Laoghaire on Thursday 7th April 2011

07 - 04 - 2011

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First of all, I’d like to thank you very much for asking me to speak at this conference today. I was originally asked to speak at this event some months ago when I was the Fine Gael Spokesperson on Communications, Energy and Natural Resources. My intention, at that time, was to speak about Fine Gael’s NewERA plan. Our plan to use money from the National Pension Reserve Fund and proceeds from the sale of state assets to drive additional capital investment, through restructured semi-state companies, in areas like broadband (fibre essentially), water, energy, forestry and bio-energy. 
 
A lot has changed since then. 
 
First of all, the election happened earlier than we thought, we won it and I now find myself as the Minster for Transport, Tourism and Sport in a new Fine Gael-Labour Coalition Government. 
 
I see this new Department as key economic Department, promoting tourism as a recovering industry which will in turn help to drive growth in our economy. 
 
Early indications signal real growth in the American and European market though the UK market remains sluggish. Of course, more tourism will increase activity in our ports, airports, on our railways and our roads all of which come under my Department. 
 
I also see the need to continue to invest in transport projects, public transport in particular, to create construction jobs in the short term but more importantly, in the long-term to improve our competitiveness and create jobs across the economy as a result. It is estimated that 15,000 jobs are created for every billion euro invested in capital projects and that the economic return for every euro invested can be as much as two euros or even 2.5 euros. 
 
Of course, you need to have the capital to invest in the first place. And that is where the difficulty lies for us.
 
We come to power at a difficult time for the country. We have a massive budget deficit. We are spending almost €20bn a year more than we raise in revenue and that needs to be brought down to a sustainable level of borrowing of 3% of GDP or roughly €5bn by 2015. An adjustment of that order will not be easy, and it is naïve to think that it will not have an impact on the capital budget. 
 
You’ll be aware the National Development Plan (NDP) was superseded by a scaled-down Infrastructure Investment Priorities Plan published in July 2010. This reduced the capital envelope available to Transport for the years 2010-2015 from approximately €17 billion to just over €10.5 billion. 
 
And, since then, we have had an IMF intervention leading to the National Recovery Plan 2011-2014 with further cuts of approximately €2 billion in capital spending. Even since then, the projections for economic growth have been pared back considerably. 
 
At the same time, the cost of cleaning up the mess in our banking sector is raising doubts about our sovereign’s ability to service its debts in the long term and that has cast a shadow on Public-Private-Partnerships. You’ll be aware the National Roads Authority has had difficulty concluding PPPs for the Gort to Tuam and the N11 Arklow–Rathnew and Newlands Cross projects. They are however continuing to work with tenderers to see if conclusion is possible. This should be clear by the end of summer.
 
The sovereign position might improve in the short-term and perhaps we will be able to return to the markets next year or the year after. But it would not be prudent to plan our capital programme based on the assumption that we will be able to return to the markets in the short-term.
 
This is the reality we face. And we need to get used to that.
 
But this does not mean that we should do nothing, spend nothing and stop all investment. 
 
I have already directed that funds not used by the NRA on new projects this year should be identified and diverted to repairing badly damaged regional and local roads. Minister of State, Michael Ring and I, are working on proposals for a new round of Sports Capital Funding using existing budgets. The last round was in 2008. These measures will result in hundreds of contracts, mainly for small, local firms, this year. And will boost confidence locally.
 
Coming in from the outside, I get the impression that the last government was unwilling to make decisions in the dying days of their administration. Planning, public consultation and preliminary works on major transport projects such as Metro North, Metro West, Luas BXD, Luas F, DART Underground, major and minor road projects have continued but funding has not been identified and timelines for construction are uncertain.
 
I am ambitious about infrastructure. And I want to see all these projects go ahead. 
 
Metro North and DART Underground perform well in cost-benefit analyses and they are exactly the kind of projects that I want to see in our capital city, my home town and the city that I love. 
 
The same applies to major road projects across the country like the Atlantic Corridor and the by-passes proposed for our towns.
 
But we cannot go on planning for projects without being able to fund them. 
 
When I walk into my Department in the morning, I pass a poster in the lobby. It pictures a young boy in a construction worker’s hat and above it there is a bold statement – ‘We are spending €36 billion improving transport in Ireland’. Below the picture is the Transport 21 logo.
 
I understand that in the region of €20 billion including €7 billion from the private sector has been spent to end 2010.
 
Colleagues, we won’t be spending anything approaching these amounts on transport infrastructure during the period of this government. We might spend that kind of money over the next twenty years but definitely not between now and the end of the term of this Government in early 2016.
 
We what want and what we need is certainty. We need to work out, for sure, how much will be in the transport envelope for investment in capital projects between now and say, 2018 and we need to be able to say very clearly which projects will go ahead in that 6 year period.
 
We need to articulate a realistic, affordable and funded capital programme for Transport and we need to get on with it. And that is what we intend to do. 
 
As part of the Government’s Comprehensive Spending Review, there will also be a comprehensive review of capital spending with a view to developing a new National Development Plan for 2012-18 as promised in the Programme for Government. 
 
That work will begin in the coming weeks, when it is agreed by cabinet it will give certainty to the industry and agencies about which projects are going ahead in the next six years and which are not. 
 
Certainly, I would like to see at least one major rail or light-rail project commence soon perhaps on an incremental basis whether it’s Metro North, Luas BXD or Dart Underground. I am keen to study what options exist in relation to Bus Rapid Transit for suburban parts of Dublin, Cork, Galway and Limerick. I want to be clear that no decisions have been to date either by me or the cabinet and all options will be considered. 
 
Separately, I am bringing proposals to government to merge the NRA and RPA into a new commercial state sponsored body, a Transport Infrastructure Service which will take on the functions of the NRA, RPA and will be equipped to take on additional functions such as procurement of Bus Rapid Transport and even planning and procurement functions beyond the transport field. The new body will be smaller than the two parent agencies in line with government policy to streamline and reduce the number of public bodies.
 
I am also beginning work on Ports Policy Review with a view to consolidating and rationalising Ireland’s Ports. I am encouraged by Dublin Port’s plans to develop its business. As you know, a public consultation on the future of the Port has begun.   In aviation, I am encouraged that passenger numbers at Dublin have stabilised and expect to see growth this year. 
 
This will bring proposals for the second runway back on to the agenda. Numbers in Cork and Shannon are still falling unfortunately.   I am working to bring more airlines into Ireland and open up more routes and I hope to come to some sort of agreement with the airlines on this in return for the abolition of the €3 travel tax and more incentives on airport charges.  
 
We also propose, in the Jobs Budget, as promised during the election campaign, to reduce employers PRSI for lower paid workers and the lower rate of VAT. This should give a small but welcome boost to the construction sector.
 
In other areas, the Programme for Government commits us to establishing a new state company, Irish Water, to take over and run our treated water infrastructure and operate it on a commercial basis. 
 
This will involve water metering and charging but it will also create a new state company that will be able to borrow on the strength of its assets and revenues and invest in our water network which is in need of billions of euros of investment. My colleague, Phil Hogan, is the lead Minister on this.
 
On the communications and energy, Minister Pat Rabbitte and Fergus O’Dowd is working to develop our NewERA concept with a view to driving and sustaining capital investment in energy and broadband. 
 
Eirgrid, ESB and other have an ambitious capital programme which they can fund from their own resources and will be supported in doing so.
 
In parallel, we are doing some preliminary work on the Strategic Investment Bank proposal and also ways in which the remaining capital in the NPRF can be used to invest in projects here at home rather than overseas.
 
In conclusion, delegates, we live in difficult times and austere times. But that does not mean that we cannot build things. The first government, set up the ESB built Ard Na Crusha when the fledgling state had little money or access to capital. Ard Na Crusha provided much of our energy for decades and is still operational today. Dublin Airport was first opened in 1940 when the World was at war and civil aviation was almost non-existent. The DART was built in the 1980s during the last recession and period of austerity. 
 
Even though times are tough and we may have to scale back and slow down our plans, we can still find space and money to maintain and modernise our transport and other strategic infrastructure and that’s what this Government plans to do.

Ends

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