Budget 2024 set out two significant measures that will help to address our major infrastructure needs and give much needed certainty to the delivery of capital programmes set out in the National Development Plan (NDP).
They are:
- Core capital expenditure for 2024 will be €12.8 billion which is an increase of €0.9 billion over the 2023 allocation.
- The new Infrastructure, Climate and Nature Fund which will see €2 billion per year added for seven consecutive years to reach its cap of €14billion.
While these measures will certainly help there are other non-financial barriers that we must overcome to successfully deliver the NDP. Michele Connolly and Paul O'Neill of our Infrastructure team explain these barriers below.
€12.8 billion of capital expenditure allocated for 2024
What you need to know
This investment is aligned to the needs set out in the NDP and as expected, the largest capital allocations were to Housing (€2.6 billion), Transport (€2.6 billion), and Health (€1.2 billion).
Whilst Housing has a €2.6 billion capital allocation under Housing for All, it is supplemented by a further €2.6 billion of Land Development Agency (LDA) investment and Housing Finance Agency (HFA) lending resulting in an overall capital provision for Housing of over €5 billion for 2024.
There was a further €1 billion allocation for the Department of Environment, Climate & Communications which will largely be targeted at SEAI’s retrofit programme, National Broadband and €110m has been allocated for developing Ireland’s Circular Economy.
Education received the fifth highest capital allocation (€0.6 billion) which will be targeted at 20 capital projects in the higher education sector but will also encouragingly provide funding for the development of centres of excellence for Net Zero Energy Buildings (NZEB) and Modern Methods of Construction (MMC).
What does this mean?
Commitment of capital funding for 2024, assigned to our greatest areas of need, is very welcome. This will be of particular importance in the housing sector as high annual budgets are needed to meet the Housing for All objectives.
We are also approaching key milestones in each of our major transport programmes (BusConnects, MetroLink, and DART+) which will start to see a large increase in annual capital expenditure as we move through planning and procurement phases into construction.
However, funding isn’t the only challenge to us delivering the NDP. We need to find ways to deliver our capital portfolio quicker and we need to drastically grow our supply chain. Last week’s announcement of the new Infrastructure, Climate, and Nature Fund should go some way to achieving this.
The new Infrastructure, Climate and Nature Fund
What you need to know
The Budget announced the establishment of an Infrastructure, Climate and Nature Fund which will commit to adding €2 billion per year for seven consecutive years at which point it will reach its cap of €14billion.
The Fund is intended to prevent any stop-start public investment in the NDP, as has occurred in the past. In the event of an economic downturn, the funds will be drawn upon to ensure that the major capital programmes can proceed.
While no direct funding was allocated to the Fund as part of this Budget, the first €2 billion contribution will come in 2024 from the dissolution of the National Reserve Fund.
What does this mean?
The Fund should provide a level of assurance to the industry that infrastructure spending will continue in the event of an economic downturn, hence preventing the ‘stop-start’ investment problem of old.
This will give much-needed reassuring signals to the market in light of the upcoming procurement of major programmes such as MetroLink, BusConnects, and DART+. It is paramount that we attract international expertise to Ireland to help us deliver these programmes, and there will be an element of nervousness given the cancellation of previous major schemes such as Metro North.
Therefore, this fund should send a message that Ireland is serious about delivering on its National Development Plan, but much more is needed to really develop a robust and competitive supply chain.
Challenging our progress
Planning
As highlighted above, funding isn’t the only challenge to us delivering the NDP. We also need to streamline the planning and approval process which is well documented.
However, there is hope with the new Planning and Development Bill 2023 which was approved by Cabinet on 3rd October. This new Bill should help to bring greater clarity, certainty, and consistency to how planning decisions are made and result in faster planning decisions. This will be key for getting major infrastructure projects, such as the Ringsend Wastewater Treatment Plant, through the planning phases quicker.
Supply chain capacity
The second biggest non-financial barrier was also somewhat addressed in last weeks’ Budget – the capacity of our supply chain. We simply don’t have the resources on the island to deliver the megaprojects simultaneously and to deliver the NDP in the timeline that is needed.
It was therefore great to see a commitment from Government to developing skills for the construction sector through the development of centres of excellence for Net Zero Energy Buildings and Modern Methods of Construction. It is also good to see that The Department of Enterprise, Trade and Employment are evaluating and forecasting the MMC skills requirement for the delivery of Housing for All.
This is a great start, but we have a lot more to do to make the industry a more attractive prospect for people starting out on their career journeys and to make Ireland a more attractive destination for skilled professionals in other countries.
Housing and delivery
The main enabler is housing, as an influx of new skills means more people who need homes, both to rent and to own. All efforts need to be focused on delivering new housing stock at pace, this in turn will support all other capital projects.
The pipeline is ambitious, with career long projects for a range of skills, lots of opportunity for future graduates, returning experienced professionals and skilled individuals from other countries.
Productivity and sustainability (in design, construction and in use) are two of the main barriers in the housing sector. MMC and digital technology in design need to be incentivised to improve the efficiency, sustainability, and attractiveness of the industry.
Green procurement measures, circular economy targets in design, and a consolidated approach to MMC across the supply chain, are all areas that need to be at the forefront of housing delivery from 2024 onwards.
Investment, while welcome, is nothing without delivery. Ireland needs skills, incentives and a change of pace today to have the infrastructure ready in time to meet the needs of the future.
Queries? Get in touch
The measures announced in Budget 2024 will affect businesses and individuals across Ireland. If you have any queries on the topics covered above, please contact Michele Connolly or Paul O'Neill of our Infrastructure team.
We'd be delighted to hear from you.
Michele Connolly
Head of Corporate Finance and Head of Infrastructure
KPMG in Ireland
Paul O'Neill
Managing Director
KPMG in Ireland
