Last year the Government admitted that capital spending allocations may be used to "mitigate excess current expenditure" and the CIF is worried about the implications for the construction and affiliated sectors if this approach was taken again in 2013.
The Government's Exchequer Returns recorded an underspend of €145 million in the net capital expenditure for 2012. While a current net expenditure overspend of €666 million was also detailed.
The CIF is concerned that there will be a further capital expenditure underspend in 2013 to make up any current expenditure shortfalls that might arise following on from the breakdown in the public sector deal.
CIF Director General Tom Parlon said: "We are calling on the Government to avoid using capital expenditure allocations to make up for the collapse of the revised public sector deal. The Government now has to find €300 million in savings and our worry is that they will target capital spending as a mechanism for filling this hole in the fiscal framework for 2013.
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"Last year the capital spending budget dropped considerably and yet there was still an underspend of almost €150 million or 4% of the total allocation. The capital spending budget for 2013 has been further reduced to €3.4 billion², which at 9.9% represents another considerable drop. Using any of that allocation to pay for the public sector wages would be shortsighted and have major ramifications for the construction industry and those other sectors that depend on construction activity. It will lead to more job losses and it will hit a sector, which is still struggling.
"With the Department of Health admitting last year that they may use some of their capital budget to pay for excess current spending, this is clearly an option that the Government takes into consideration. Our industry can’t afford for this option to be considered this year. For that reason we are calling on the Government to rule out dipping into the capital budget to make up for this shortfall.
"Construction activity makes up a major part of the capital expenditure budget. Many different economists have argued that one of the most effective ways of enhancing domestic economic growth is to harness construction activity. Construction relies on local labour and raw materials. This boosts suppliers and takes people off the live register. It is worth repeating that according to Government figures, one in four unemployed people in this country are former construction workers. It is estimated that €1bn spent on capital projects generates approximately 10,000 jobs.
"These facts underline the importance of the capital expenditure budget to the construction industry and related industries. We hope the Government will consider these points as they find a solution to the collapse of the public sector deal."
(CD/H)
