The Government “faces a dilemma” on major infrastructure projects as it faces challenges such as labour shortages and a rising population, a report has said.
New research by think-tank the ESRI, funded by the Department of Public Expenditure, National Development Plan Delivery and Reform, examined the Government’s flagship National Development Plan.
While examining any new factors that had emerged since 2021 and how projects could be prioritised, it found that “the earlier level of ambition may have underestimated what is needed”.
It said it was to be welcomed that all counties experienced population growth between 2016 and 2022, but the fact that the eastern and Midlands region’s populations are growing beyond what had been expected “is a concern”.
The report outlines a conflict between the need for public investment – due to Ireland’s rising population and the challenge it faces to meet its emissions reduction targets – and constraints on investment such as labour shortages, with a historic low rate of unemployment, 3.8 per cent.
It said it was “almost certain” that existing targets for housing supply “understate need”, based on the increase in population recorded by the census.
The National Development Plan (NDP), launched in 2018, set out a plan for public investment in Ireland, with those aims renewed in 2021.
The plan promises €165 billion for a range of projects – including motorway investments, the Ulster Canal and Narrow Water Bridge projects, and planning reforms – over a 10-year-period.
The ESRI said that if there were no constraints, the “obvious” response would be to accelerate the delivery of projects across the island, but this risked increasing inflation in the construction sector, which could see the cost of projects rise.
It suggested a slower rollout of NDP projects.
It acknowledged that approaches based on tax increases, spending reductions and deliberate delays in an attempt to tame inflation would likely present “political challenges”, and that more “creative” solutions were needed.
It said that the long-term benefits of investment should be acknowledged even if they result in inflation in the short-term.
“For example, increased building of housing units will lower the price of the existing stock, all else being equal. With regard to energy, a faster transition to renewable sources could reduce energy costs,” the ESRI said.
It said it is “far from guaranteed” that Ireland would meet its targets to reduce emissions by 51 per cent by 2030, and climate policy efforts “need to increase rapidly” to meet them.
ESRI director Alan Barrett said the Irish government “faces a dilemma”.
He added: “On the one hand, there is a clear need for investment in public infrastructure as our population and economy grow and our climate targets remain challenging.
“However, on the other hand, the economy is operating at full employment so the resources needed to accelerate the NDP are not readily available.
“In this report, we suggest that the government revisits the analyses undertaken for capital projects and re-assesses the sequencing of projects to account for the demands they will place on resources.
“This re-assessment should also consider the potential of projects to ease inflationary pressures.
“While decisions must ultimately be made by those who have been elected, the use of quantitative metrics can aid decision-making”.
