19th November 2015

Thank you Chairman,

I am delighted to be here today to attend this conference which brings together many of the businesses and organisations that will help us deliver our programme of infrastructure over the coming years. From a Government perspective, the groups represented at this conference are our partners as we build upon the success of our economic turnaround by investing in key social and economic infrastructure.

Current Economic Situation
Ireland’s economic turnaround has been remarkable. From a situation of calling in external financial assistance, we now have the highest level of economic growth in the OECD. Our economy is larger now than before the crisis.

When the Government was elected, the Budget deficit stood at 12.5% of GDP. This year it is forecast to be 2.1%, the lowest since 2007, and well inside the original 2015 Budget target of 2.7%.

The turnaround in our debt sustainability is equally remarkable. From a peak of 120%, the latest Department of Finance projection sees our debt ratio falling next year to 93 per cent of GDP and to below 80 per cent by 2021. A falling debt ratio is important in enhancing the economy’s resilience and in reducing our vulnerability to future external shocks.

Unemployment has fallen dramatically – from a peak of over 15% to just under 9% as of yesterday’s CSO figures. 140,000 jobs have been created since the low point in 2012. Our workforce has seen 12 successive quarters of annual employment gains, more so these gains have been exclusively in full-time employment and broadly based across 12 of the 14 economic sectors.

Just last week, Apple, one of the most technologically advanced – not to mention profitable – companies in the world announced they would hire an additional 1,000 people at their plant in Cork. This represents a huge vote of confidence in our economy.

Clearly, the difficult but necessary decisions we made as a Government – and the sacrifices our citizens have made – are beginning to pay off.

As recent Exchequer figures have shown, we now have an opportunity to make long term sustainable investments in our economic and social infrastructure. These investments will boost the productive capacity of our economy, increase living standards and provide for future growth.

Capital Plan Overview
The recent Capital Plan serves as a framework for capital investment over the next six years. The Plan represents a blueprint for large scale capital infrastructure to be delivered by the State and semi-State sector in the years out to 2021.

€27 billion will be invested via direct Exchequer spending. But as a lot of the delegates in this room will know, direct Exchequer spending is only part of the story. Approximately €14.5 billion will be invested by the Commercial Semi State sector. Furthermore, the Capital Plan included a new phase of our successful PPP programme – more of which I will speak about later.

In total, €42 billion is expected to be invested in Irish Infrastructure over the next six years. At the time of the publication of the Capital Plan, State-backed capital investment, therefore, constituted a forecast average of 3.5% of GNP per annum.

From our engagement with industry, we know that what is most wanted from Government is a long term financial commitment by the State to deliver large scale projects. The Capital Plan provides this commitment. It gives the national and international construction industry a clear pipeline of projects that will be developed in Ireland over the six years.

Individual Departments and State agencies – and many of the delegates here today – are now hard at work preparing the groundwork for the delivery of these projects.

Decisions to allocate funding in the Capital Plan were made following a lengthy review process. The analysis identified capacity constraints, infrastructural bottlenecks and areas where demand pressures were building. It informed the investment decisions contained in the Framework, directing funding where it is most needed and looking to maximise the economic and social return to the taxpayer.

The Capital Plan marks the beginning of a return to normal levels of investment. In order to sustain growth, we must invest. But we must invest in the right way. The Government is committed to making affordable, sustainable investments that boost the productive capacity of our economy, improve public services and lay the foundations for future growth.

Fiscal Rules
I want to briefly discuss the context in which all budgetary decisions – including the Capital Plan – must now be made.

The fiscal rules are a critical element to the new budgetary architecture. In simple terms, they ensure that public expenditure cannot rise above the potential growth rate of our economy. All additional expenditure above and beyond this rate of growth must be balanced by increased Government revenue.

Often, I feel this crucial point is lost in the clamour for additional public spending.

This fiscal framework has been put in place to minimise the risk that significantly increased and ultimately unsustainable levels of public spending are financed through ‘windfall’ or cyclical revenue which evaporates in the face of a sharp downturn in the economic cycle. Our recent economic and fiscal history clearly highlights the severe consequences of unsustainable fiscal policies.

This contrasts with the broader economic benefits and investor confidence that has been secured by the Government’s commitment to prudent and responsible budgetary policies as evidenced by Budget 2016.

The discipline imposed by the fiscal rules increase the need to ensure that public funds are spent wisely. In relation to capital infrastructure, investments with a clear economic or social rationale need to be prioritised. For this reason, in writing the Capital Plan the Government focused on a number of key areas. Some of which I will now briefly outline.

Transport
In the decade up to 2008, capital spending in Ireland was targeted on transport infrastructure deficits that represented a significant bottleneck in terms of our long-term growth potential.

Large scale investments were made in our road network, public transport links and airport facilities. As Europe’s fastest growing and most dynamic economy, it is essential that we preserve and intensify our competitiveness by continuing to invest.

In order to do this – and in recognition of the fact that large transport projects have long lead-in times – the Government provided a 7 year capital envelope to the Department of Transport. A total of €10 billion will be available over the period. By 2022, we will have doubled the level of annual investment in the transport sector to €2 billion per annum.

Health
Although not as acute as in other European countries, Ireland faces significant demographic pressures as the proportion of our citizens that are over 65 increases. To meet these challenges, there will be large scale investment in healthcare facilities.

By 2021, €600 million will be spent every year upgrading our hospitals, residential homes and healthcare facilities.

At the other end of the demographic spectrum, the Capital Framework provides funding for the relocation of the Dublin Maternity Hospitals, as well as Limerick Maternity Hospital. Following the excellent example of the Primary Care Centre PPP project, Exchequer funding will be complimented by a new PPP project in healthcare.

Education
The Capital Plan also provides significant funding for Education projects. We will spend over €3 billion in the next six years building new schools and upgrading existing school buildings. At third level, a total of €350 million will be invested including a new €200 million PPP investment in our Institutes of Technology.

Non-Exchequer Investment
As many of you will know, we have recently successfully completed PPP procurement competitions in the Education and Transport sectors. I understand that the procurement phase on another Transport project – as well as projects in the Justice and Health sectors – are also due to reach completion shortly.

In addition, PPP sites have recently been announced in the area of social housing. The sites will form the first of three separate bundles of PPP housing that will deliver a total of 1,500 new homes. This is significant as it marks the first time this model of PPP housing will be used in Ireland.

The new phase of PPP projects announced in the Capital Plan will continue our notable record in the area. Projects with a combined value of around €500 million will be developed in the Justice, Education and Health sectors. The programme will build on our recent successes and leverage Ireland’s positive reputation among investors in such projects.

Since the introduction of the PPP model in Ireland in the late 1990s, we have successfully developed the institutional and structural capacity to deliver high quality PPP projects across a number of sectors.

Our record is impressive and in a relatively short period of time we have built a significant stock of assets procured through PPP. In fact, as a percentage of GDP, Ireland now has one of the highest levels of PPP investment in Europe.

Private Investment
Private sector investment in infrastructure – such as in PPPs – is essential if we are going to continue to boost our productive and economic capacity.

Worldwide, there has been underinvestment in infrastructure. Over recent decades Developed countries have underinvested in critical sectors such transport, energy and ICT. At the same time, developing countries are struggling to keep up with both demographic change and the pace of economic growth. Many of them need a sustained period of investment to help them make the jump from developing to developed country status.

This situation presents opportunities for both the public and private sectors. Private investors have an opportunity to invest in long term projects with steady and predictable returns.

At the same time, governments and State authorities can now tap into large pools of private funding, as well as the expertise that many international finance, engineering and construction companies possess.

I believe Ireland is well placed to benefit from such private sector investment. In addition to the new PPP programme, a number of key areas will benefit from private funding over the coming years.
Ireland’s water infrastructure is one such area. Irish Water recently announced a six year capital investment plan of €5.5 billion. Investments will be made in water quality and capacity, as well as in new infrastructure. €1.4 billion of this will be spent over the short term. This very significant level of investment aims to redress decades of underinvestment in this critical area.

On account of applying a well-known economic regulatory model in international terms, Irish Water will have the ability to borrow from international banking and capital markets.

Together with the commercial semi state bodies in the energy generation and distribution sectors, it is well placed to fund large scale infrastructure investment.

ICT infrastructure is another area that will benefit significantly from public-private collaboration. I understand there will be a presentation on this issue later, but I will say that I very much welcome recent agreement on the National Broadband Plan.

The Plan will utilise significant private sector investment and be supported by an initial €275 million investment by the Exchequer. It will ensure that every business and household in Ireland has access to high speed broadband and help to connect communities, spread growth and support local business.

Conclusion
The National Broadband Plan is one example of how the public and private sectors can work together. Through a shared sense of purpose and by building on their respective strengths, I believe there is opportunity and advantage for all parties as Ireland continues to recover and invest in future growth.

I think events like today are of great assistance in facilitating this collaborative process. They bring people together from different industries and sectors – both public and private – and provide an opportunity to build relationships that will hopefully deliver results in the future.

So thank you for the opportunity to speak, I hope you enjoy the day.

ENDS