The road to recovery and resilience

Minister Michael McGrath provides an update on the National Recovery & Resilience Plan and the National Development Plan, as Ireland sets about rebuilding its economy with a focus on sustainability and resilience.

In the past 15 months, the world has been hit by a massive health and economic crisis, unprecedented in modern times. No country could possibly try to tackle this on its own. By collaborating with international partners, we have been able to harness the best available medical knowledge for diagnosis, treatment, and vaccination against COVID-19.

It was clear from early on in the pandemic that, as well as a concerted medical response to the crisis, there would need to be a dedicated economic plan to mitigate the economic impact. In July of last year, EU leaders met against a backdrop of growing turmoil in member states over the impact on people’s livelihoods. At this summit, an agreement was reached on a recovery package to complement the work of national governments. 

The National Recovery & Resilience Plan

NextGenerationEU

The European Union’s €750 billion NextGenerationEU recovery instrument, along with the Union’s trillion-euro budget for the next seven years, is central to the EU’s response to the global pandemic.

There is an important difference in the EU’s response to the global pandemic compared to the response to the financial crash. Lessons have been learnt, and the EU moved quickly to reassure member states that we would be supported.

NextGenerationEU aims to help repair the immediate economic and social damage brought about by the pandemic and prepare for a post-COVID Europe that is greener, more digital, more resilient, and fit to face the future.

The Recovery and Resilience Facility is the largest component of NextGenerationEU, making €672.5 billion available to member states in the form of grants and loans to stimulate economies and improve conditions for citizens. Every crisis is also an opportunity and, as we move on from COVID-19, we must use these funds to make a real difference to our country, reform where it’s needed, and put climate action at the top of our agenda.

The Recovery and Resilience Facility and Ireland

Ireland is expected to receive €915 million in grants under the facility in 2021 and 2022. A further set of grants is to be allocated in 2023, taking into account economic developments between now and then.

To access this funding, Ireland has developed a National Recovery & Resilience Plan for approval by the European Union. The plan sets out the reforms and investments to be supported by the facility.

My Department of Public Expenditure & Reform is responsible for preparing this plan, along with the Department of the Taoiseach and the Department of Finance. Other departments have also given their input to ensure a coordinated ‘whole of government’ approach. We are all on the same page when it comes to using these funds wisely and getting the best possible value from this investment.

Recovery and Resilience Facility

The Recovery and Resilience Facility is structured around six pillars: 

1. Green transition;
2. Digital transformation;
3. Economic cohesion, productivity and competitiveness;
4. Social and territorial cohesion;
5. Health, economic, social and institutional resilience; and
6. Policies for the next generation, as well as seven flagships identified by the Commission.

Addressing green and digital transition is a hallmark of the facility. National plans must devote a minimum of 37% of expenditure to climate and 20% to digital investments and reforms.

Plans should also seek to address seven flagship areas identified for reforms and investments:

• Clean technologies and the acceleration of development and use of renewables;
• Energy efficiency of public and private buildings;
• Sustainable, accessible, and smart transport;
• Roll-out of rapid broadband services, including fibre and 5G networks;
• Digitalisation of public administration;
• Increase in European industrial data cloud capacities and the development of powerful and sustainable processors; and
• Adaptation of education systems to support digital skills and educational and vocational training.

Member states are required to embed the measures they plan to take in their national budgetary processes.

The plans must also strike a balance between reforms and investments and seek to address challenges identified in the relevant Country Specific Recommendations.

Ireland’s Plan and Projects

Ireland’s Plan has a particular focus on green and digital transition, as well as supporting economic recovery and job creation.

It is aligned with the National Economic Recovery Plan and has been developed alongside the ongoing review of the National Development Plan.

Priorities for the National Economic Recovery Plan aligned with the National Recovery & Resilience Plan include climate actions and reforms; digital delivery of public services; social and economic reforms; digital transformation and adoption of artificial intelligence (AI) technologies by SMEs; and research and innovation.

The National Recovery & Resilience Plan includes a suite of projects focused on:

• Advancing the green transition;
• Accelerating and expanding digital reforms and transformation; and
• Social and economic recovery and job creation.

Several large-scale reforms and investments are included to maximise the impact of the funds provided.

Next steps

National plans must meet stringent EU requirements set out in the Recovery and Resilience Facility regulation before they receive approval from the European Commission and the Council of Ministers. Intensive negotiations with the European Commission have been underway in recent months, and Ireland’s plan will be considered carefully for two months before it is approved.

The facility is a performance-based instrument, which means that demanding milestones and targets must be met before funding can be drawn down – and this is as it should be.
As well as milestones and targets, requirements include green and digital expenditure tagging, detailed costings, an appropriate control and audit framework, and compliance with the ‘do no significant harm’ principle.

Plans should demonstrate a lasting impact on member states, whether by strengthening job creation and social resilience, whether the expenditure is reasonable compared with the expected return, and whether suitable control mechanisms are in place to prevent corruption, fraud, and conflict of interest.  

European solidarity

The lifetime of this Government will see Ireland mark 50 years of EU membership. Our membership has played an immense role in our social, economic, and political development. The values of the European Union are our values. That is why the Programme for Government sets out a vision of Ireland at the heart of Europe and global citizenship.

During the five decades, we have benefited from the solidarity that comes with membership. We have seen this over the last year as we responded to the global pandemic and in the previous five years as we navigated the challenges posed by Brexit.

In the Recovery and Resilience Facility, we see further evidence of that solidarity. In the coming weeks and months, the National Recovery & Resilience Plan, along with the National Economic Recovery Plan and the National Development Plan, will enable us to move beyond the pandemic to rebuild the economy and improve our country for all. We have been through a difficult period, and the economic and social scars cannot be underestimated or dismissed. However, decisions at the EU level have shown that we really are all in this together. Member states will be supported in finding their way forward, and we will emerge as a stronger and more resilient EU.

The National Development Plan

Creating our shared future

Like accountants, ministers and civil servants are analytical thinkers, carefully scrutinising the driving forces of change, the prevailing macro-economic factors, and the views of the people we serve. We depend on evidence and numbers, and this analysis is vital as we craft the revised National Development Plan, which is due for publication later this year.

The National Development Plan is one half of Project Ireland 2040. Launched in 2018, it sets out the investment priorities that underpin the implementation of the National Planning Framework.

When this Government took office last July, we set about tackling the many challenges we face as a country, including the COVID-19 pandemic, Brexit, housing, and an uncertain political landscape.

Our country is at a critical stage in its development, and there has been much discussion about an ‘infrastructure-led recovery’ across the globe. We know that we need to create opportunities to rebuild a better Ireland for all, as without substantial reform, we risk repeating the mistakes of the past. Investment decisions must support broader economic, environmental, and social outcomes. Our national recovery requires a holistic approach involving the contribution of both urban and rural areas. It is my view that we should take the opportunity to create the foundations for long-term, sustained economic growth. That is why, on taking office last July, I asked my officials to bring forward the mooted review of the National Development Plan.

Economic context

Our population is set to grow by one million people by 2040. The infrastructure implications of that alone are enormous. We must ensure we have thriving and sustainable communities for future generations.

Ireland’s economy was the only one to grow in the EU last year. The European Commission expects Irish GDP to grow by 3.4% in 2021 and marginally faster in 2022. These are solid numbers considering the global challenges we’re facing.

The impact of COVID-19 on our working lives has been seismic. We have undertaken the greatest global home-working experiment ever, moving it from the fringes to the mainstream. The Government’s National Remote Work Strategy helps to make remote working a permanent option in Ireland. It plans to give employees a legal right to request remote working and to introduce a code of practice on the right to disconnect. The Strategy commits to investment in remote work hubs and the development of the national broadband plan.

The Programme for Government characterises the climate emergency as the single greatest challenge facing humanity. We are the first generation to truly feel the effects of climate change, and we may be the last to have an opportunity to reverse it. This is why we have to act now. In the public consultation we undertook, there was near consensus that the revised National Development Plan will have to be viewed through a climate lens.

Public Spending Code

We need to ensure that the right policy settings are in place. Rigorous cost-benefit analysis is essential, particularly in the current economic climate. As part of the ongoing reform of Ireland’s public investment management system, the Department of Public Expenditure & Reform has reviewed and updated the Public Spending Code. The review was informed by an extensive consultation process involving engagement with public officials and an examination of international best practice. Importantly, the Public Spending Code also incorporates learnings from various capital projects in Ireland, including the National Children’s Hospital.

The update to the Public Spending Code specifically strengthens the existing guidance to better reflect the realities of project delivery with a particular focus on financial appraisal, cost estimation, and risk management.

The updated Public Spending Code:

• Supports public bodies in delivering greater value for money;
• Provides greater clarity on roles and responsibilities;
• Revises the project life-cycle to reflect the realities of project delivery;
• Strengthens guidance; and
• Increases transparency through the publication of business cases and evaluation reports.

This update followed an extensive consultation process, and as a result, there is a stronger focus on cost estimation and professional project management. We have also learned from international experience when it comes to managing mega-projects over €100 million. There are at least 40 projects in this category in the National Development Plan. Later this year, we will have a new governance and assurance process for major projects. This will involve two external reviews of major projects at key points in the project life-cycle by independent experts in infrastructure delivery.

I have asked my ministerial colleagues to rigorously assess the costs of existing planned projects to ensure that those costs are up-to-date and realistic. I am also developing a new external review process for all major projects worth over €100 million.

The process

In early April, I published the Phase 1 Report on the Review of the National Development Plan. The work carried out as part of Phase 1 included: 

• Macro-economic analysis;
• Public capital expenditure and infrastructure demand analyses;
• Consideration of climate action, housing, and planning; and
• Alignment with the National Planning Framework.

The Phase 1 report also includes detail on the successful public consultation process, Review to Renew, which generated 572 submissions. Phase 2 will involve detailed engagement with colleague departments to agree on capital allocations for the coming period and priority programmes for inclusion in the new National Development Plan. Combined, this is a solid evidence base that will allow us, as a Government, to make informed decisions and bring forward a new National Development Plan in the summer of 2021.