Investing €1 billion in the construction sector would create at least 10,000 jobs and would lead to at least half the expenditure being returned to the State if the work goes to Irish companies and Irish workers, according to the Construction Industry Federation (CIF). The CIF were reacting to media reports which suggest the Government is looking at the possibility of such a stimulus, following projections which suggest the State may be on track to overshoot the deficit target.
The Federation believes such a measure would also help address the major cuts to capital spending which have taken place since the downturn. Gross capital spending has dropped significantly, falling by 62% in the six year period from 2008 to 2013. As capital spending represents a major source of construction activity, this has exacerbated the sector’s decline in recent years.
The gross capital spending over recent years is:
2008 €9 billion
2009 €7.3 billion
2010 €6.4 billion
2011 €4.5 billion
2012 €3.9 billion
2013 €3.4 billion
“It would be a very progressive measure if the Government were to follow the course of action that has been suggested in media reports and bring forward a €1 billion investment in construction,” said CIF Director General Tom Parlon. “Over the last few years our economy has been constrained by a total commitment to austerity. While it was important to control spending and make our economy competitive again, we also need to be looking at ways of encouraging growth.
“Capital spending has been one of the areas that has really borne the brunt of austerity. It has fallen by over €5.5 billion in the space of six years, dropping year on year. Those cuts have had an extreme impact on the construction sector. For a sector that was already going through a significant decline the cuts to capital spending have significantly exacerbated the problems in our industry and lead to greater unemployment.
“Can you imagine the furore that would have been generated if any other sector had cuts of 62% for one of their main sources of activity over the past six years? There would have been outrage. But because it is capital spending, rather than current expenditure, successive Governments have seen fit to dip into that particular purse. They’ve been sacrificing stimulus to cover their day to day overruns. It’s about time that thinking was altered and we saw more capital spending.
“Capital spending helps stimulate economic activity. It creates jobs and improves cash flow throughout the economy. 10,000 direct construction jobs are generated by every €1 billion spend on capital projects. Capital spending also improves our infrastructure, benefitting Irish businesses and the Irish public.
“When capital spending goes to Irish companies approximately half of that money is repatriated to the State in the form of taxes – be they income tax, PRSI or VAT on materials for the project. That does not take into account the multiplier effect when the income generated is spent with other Irish businesses.
“If you also factor in the possible reduction to the number of people on the dole, there is be further benefit. Taking a person off the dole means less is being spent on social welfare payments – so the benefits are felt on both sides of the Exchequer ledger. One in four people on the Live Register are former construction workers so there is great potential for the Government to get people back to work.
“We really hope the Government will proceed with these measures and bring forward a commitment to more capital spending in the coming months. The capital spending purge has been going on for too long and now is the time to reverse that trend,” Mr. Parlon concluded.