OPINION: Investment in capital projects essential for continued economic growth

IRELAND spends less in important areas necessary for long-term economic growth than in other European Union countries which have a similar level of GDP per capita.

These areas include investment in physical infrastructure, research and education, particularly at primary level.

The country is under-spending in these critical areas to the tune of a whopping €3 billion per annum with the vast bulk of this in the area of primary education.

According to experts, about €2bn extra per annum is needed to be invested in primary education while a further three quarters of a billion euro is needed for infrastructure.

On top of this, of the ten richest EU member states Ireland has the lowest research spend per capita.

But to pay for this increased investment independent reports have recommended that tax cutting plans be abandoned by the Government.

Successive opinion polls in recent years have indicated that a majority of citizens favour increases in spending on services rather than tax cuts.

Whether citizens also prefer if tax cuts are abandoned in favour of investment in long term projects and goals, which all agree are essential to the future health of the economy and by extension society as a whole, is another question.

Such long term investment projects would take a considerable time to accrue benefits which are easily discernible by ordinary citizens.

In contrast tax cuts will lead to increases in disposable incomes while increased investment in services should be noticeable by all citizens, particularly in the area of health.

The Nevin Institute, a trade union funded body, argued in the past that spending increases on long term projects that favour economic growth would be good for the State's economy and people.

It is difficult to argue with such an analysis particularly when the Institute cites

education, infrastructure and research and development as three key areas of Government spending that enhance long run economic output.

The Institute said that investment in human capital development is crucial for long term growth, and that under-investment by Ireland in education per capita is "a false economy in the long run".

Efficient investment in infrastructure is also strongly related to a long term increase in a country's productive capacity.

Indeed prolonged under-spending leads to bottlenecks that hold back growth potential.

In the lead-up to Budget 2022 the Government must give serious consideration to an ambitious capital investment programme particularly when tax revenues are buoyant and the economy is performing robustly despite the many external threats it faces.

Investment in education and infrastructure will form a strong foundation to ensure that the economy continues to perform well into the future.

However, such investment will require strategic long term thinking by the powers that be in Government which runs against the understandable short term thinking which dominates politics where electoral considerations are often paramount.