Serious deficits in national infrastructure are undeniable. The collapse of the State capital programme, which halved in the years following the banking crash of 2008 and has only recently recovered to pre-crash levels, has cast a long shadow.

There are visible shortfalls in the quality of the road network, in schools and hospitals and in the availability of affordable housing.

The accommodation crisis has many causes, but inadequate budgets for the provision of water supply, sewerage and roads have held back construction projects in many areas.

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The budget allocations to State capital investment have risen quickly over the last few years and there are insistent demands for further increases. But independent economic commentators, including the Central Bank, the Fiscal Council and international bodies such as the IMF and the European Commission, have urged caution.

There are pressures on the current budget anyway, with pre-election temptations for tax reliefs and extra social spending.

A return to regular budget deficits could prove risky, especially if the boom in tax revenue from multinationals begins to dry up.

The record of oversight on State capital spending, particularly on big once-off projects, has been poor, the most egregious example the National Children’s Hospital, now expected to cost €2.25bn, more than three times the figure initially approved by the Government.

The official policy is to keep future allocations to capital spending within agreed limits and to prioritise.

It is simply not possible to rush ahead with ambitious schemes under every heading as has been urged by business and regional lobby groups.

Caution is consistent with the Public Spending Code which, contrary to appearances, remains in force. It requires that all major capital investments by the State are subjected to an independent analysis of costs and benefits.

The code has not been rigorously enforced by the Department of Public Expenditure and Reform, which ought to have veto powers to stop capital projects where the cost estimate is not credible, or where the project promoters are unreasonably optimistic about benefits.

Poor projects are meant to be weeded out under the Public Spending Code and when they are not, better projects get deferred or abandoned.

There is a real economic cost when poor projects go ahead and the cost is the denial of priority to better ones.

Public expenditure

The Department of Public Expenditure and Reform was established in 2011 by the incoming Government after the general election of that year.

It consisted essentially of the old public expenditure division of the Department of Finance and gave the guardians of the public purse a voice at cabinet additional to the Minister for Finance, sometimes assisted by the Taoiseach and otherwise out-numbered 14 to one by ministers for the various spending departments.

Undisciplined capital spending had been a component in the runup to the insolvency of the State and consequent reliance on bailouts from the IMF and European institutions when the Government was, for the first time in its history, unable to finance itself in the nightmare summer of 2010.

The intention was that unwise spending projects would face an additional layer of scrutiny.

Spending was indeed contained through the difficult years that followed, too vigorously in the case of public capital, and significant tax increases had already been imposed.

The public finances were stabilised in due course and public spending, both capital and current, has since increased quickly in real terms.

Promoters are often State agencies and are being permitted to mark their own homework

The department has been renamed the Department of Public Expenditure, National Development Plan Delivery, and Reform.

The injection of ‘delivery’ into the title downplays its oversight mission – inviting the political system to focus on the implementation, rather than the evaluation, of capital projects.

Once a project has secured political endorsement, the focus is on the timetable for completion, rather than on costs and benefits.

The pressure for a bigger capital programme is inevitably coming from lobbyists as well as from an objective evaluation of circumstances and national priorities.

Big projects

Overshoots on big projects like the National Children’s Hospital are lamentable and the full overshoot has yet to be investigated thoroughly by any of the Oireachtas committees.

It is unclear what role the Public Spending Code has played, if any, in interrogating the disastrous cost estimates. But there is a deeper problem. It has become standard practice for the cost-benefit analysis of major projects to be conducted by consultants, frequently accountancy firms, selected and paid by the projects’ promoters.

Promoters are often State agencies and are being permitted to mark their own homework.

The consultants they hire do not bite the hand that feeds them and rarely produce credible economic evaluations, whether through the want of incentive or competence.

A simple reform would be a Public Investment Act requiring that economic evaluations no longer be conducted by project promoters, but by the Department of Public Expenditure.