The Ulster Canal 15: spinning in the grave

Regular readers will know that I do not believe that the proposed rebuilding of the Ulster Canal, or the stretch from Lough Erne to Clones, would be a good investment of taxpayers’ (or German taxpayers’) money. I have a series of web pages about it, starting here, and you can read the whole lot if you want to.

Problem 1: a poor investment of public money

I summarised my views in a letter to Craggy Island, given in full on this page, from which this is an extract:

I have noted that there have been three different proposals: complete restoration, restoration at the two ends and restoration only of the stretch from Lough Erne to Clones. The last of these is the current proposal, and I note that the North South Ministerial Council agreed to it on the Irish government’s undertaking to pay the full cost. I have not been able to find a full cost-benefit analysis for this proposal but, on the basis of the published analyses of earlier proposals, I have concluded that the Clones-only project makes even less economic sense than the previous proposals.

 I have also concluded that neither the UK government nor the Northern Ireland Executive has any intention of spending a penny on any part of the Ulster Canal, and that (even if it does reach Clones) the canal will never get to Lough Neagh.

So that’s the first problem: the Ulster (or Clones) Canal proposal was a poor investment even when Ireland could afford it; it makes even less sense now.

Problem 2: a risky investment for local businesses

The second problem is that there is a danger that citizens of Clones might be persuaded, by over-optimistic assessments of the likely benefits of the proposed canal, to risk their own money on canal-related investments.

The Clones Regeneration Partnership (whose project coordinator is funded by Craggy Island) has been bigging up the Ulster Canal, urging folk to consider such investments; I urge them to consider the risks.

Problem 3: it may never happen

One such risk is that the canal will never be built.

While my initial focus was on the poor return for the taxpayer (and for any private sector investors), I noticed that there was actually no provision for funding the canal. This is the third problem: that the government could not afford it.

Unfortunately Craggy Island has been refusing to admit that, and only now is the new government letting the truth slip out. I discussed the problem here and here, with updates in later documents in the series.

Dáil questions 21 July 2011

On 30 June 2011 I pointed out that Craggy Island was holding up a large sign reading “There is bad news about the Ulster Canal so we’re not going to tell anybody about it”.

On 8 July 2011 the Northern Standard reported the first official public acknowledgement that the Ulster Canal project might be in trouble. In the Dáil, the Taoiseach repeated the bad news to Gerry Adams but the Clones dudes continued to repeat that all was well.

The main news came on Thursday 21 July, when there were both written and oral questions in the Dáil about the Ulster Canal.

The oral question was from Sandra McLellan, a Sinn Féin TD for Cork East, and was answered by Dinny McGinley, Fine Gael TD for Donegal South-West and Minister of State for Gaeltacht Affairs and thus junior minister at the Department of Arts, Heritage and the Gaeltacht (né Department of Tourism, Culture and Sport), successor to Craggy Island.

The written questions were asked by Heather Humphreys, Fine Gael TD for Cavan-Monaghan, and Brendan Smith, Fianna Fail TD for the same constituency; they were answered by  the senior minister, Jimmy Deenihan, Fine Gael TD for Kerry North West Limerick and Minister for Arts, Heritage and the Gaeltacht, once Chairman of the Lartigue Monorail Restoration Committee.

The three questions were different:

• Heather Humphreys: asked the Minister for Arts, Heritage and the Gaeltacht if €35 million was ring-fenced for the restoration of the section of the Ulster Canal between Clones and Upper Lough Erne; if this funding was included in any budget between 2008 and 2010; and if he will make a statement on the matter.
•  Brendan Smith: asked the Minister for Arts, Heritage and the Gaeltacht the proposals to progress the restoration of the Ulster Canal; if funding will be provided for this project in 2012; and if he will make a statement on the matter.
• Sandra McLellan: asked the Minister for Arts, Heritage and the Gaeltacht if he will confirm his commitment to ensuring the restoration of the Ulster Canal between Clones, County Monaghan and Lough Erne, County Fermanagh, in line with commitments at the North South Ministerial Council in 2007 and in view of this project’s important economic potential for this central border region; and if he will make a statement on the matter.

The Dáil answers

The two written questions were taken together and given the same answer; the oral question was answered using pretty well the same script, with minor differences in capitalisation and in the wording. Here is the result of comparing the documents using Microsoft Word:

As the Deputy will be aware, the North–/South Ministerial Council plenary meeting(NSMC) Plenary Meeting in July 2007 agreed to proceed with the restoration of the section of the Ulster Canal between Clones and Upper Lough Erne. The then Government agreed to cover the full capital costs of the project, which were estimated at that time to be of the order of €35 million.35m. However, Government accountingAccounting procedures do not provide, in that sense, for ring-fencing the ’ring-fencing’ of funds for projects of this nature and I can confirm that this funding was not included in any budget between 2008 to 2010.

I am advised that it was always the intention that the Ulster Canal project would be funded from the Waterways Ireland annual allocations, as agreed through the annual Estimatesestimates processes in this jurisdiction, as well as the deliberations of the council with regardNSMC in relation to annual budgets. I am advised also that it was also a key consideration throughout the process that the Ulster Canal project would be supported by a significant level of projected income from the commercialisation of certain Waterways Ireland assets, – a scenario that was affected negatively by the economic downturn.

ThatClearly, that downturn is of major significance and presents serious difficulties to my Department during this period when there is such pressure on the public finances. While I intend to explore all possible options that may assist in the advancement of this project but, it must also be recognised that the Government is engaged at present in a comprehensive reviewComprehensive Review of expenditureExpenditure, under which all spending is being examined rigorously. Notwithstanding that, the MinisterI have asked my Department to keep in regular contact with Waterways Ireland with a view to advancing the project to the extent possible, within the current constraints. In this regard, the Deputyyou will be aware that Waterways Ireland is in the process of finalising documentation in order to proceed to the stage of submitting an application for planning permission, which is –a significant milestone for the project.

The oral question allowed for a follow-up:

Deputy Sandra McLellan: The Ulster Canal project holds enormous potential to open up the central Border area, which has experienced economic disadvantage for many years due to effects from its location. The potential positive impact on all the towns and villages in the canal corridor would lead to significant regeneration and benefits due to increased tourism, business development and prosperity in general, not to mention the many construction and ancillary jobs that would be created.

Does the Minister of State agree that this project can return major social, economic and peace dividends? I appreciate that 2007 was a very different time to now, economically speaking, but the merits of the project stand. Does the Minister of State agree that a large amount of preparatory work has already gone into the project, including feasibility and socio-economic studies, as well as extensive community and stakeholder consultation, to bring it to its current position? Will the Minister of State give a commitment that this project is a priority in light of the economic, social and peace dividend, and in light of existing evidence that such amenities provide a substantial boost for local economies? Is there potential for other canals to be taken in charge by Waterways Ireland?

Deputy Dinny McGinley: I agree with the Deputy’s comments that completion of this project would bring great economic benefit to the area. It is an almost unique area in the country, with Fermanagh being the county of islands and lakes. I drove along the Erne last Sunday and returned in a happier mood with Donegal having won the Ulster football title. The countryside looked even better on the return journey. I went into a hotel on the banks of Lough Erne and saw the boats on the lake. Completion of the project would bring great benefits, as tourist activities such as boating are popular these days. People wax lyrical about the canals in France and elsewhere but we have our own set in beautiful countryside.

This is a North-South project to which we are committed. I am sure the Deputy would agree that the process has not come to a halt as we are preparing to go for planning permission. The process is moving along but we must be mindful of the economic and financial constraints to which we are subject. Nothing would give me greater pleasure than moving the project on. I know the Minister is very interested in this because it was discussed about a fortnight ago in Armagh at the North-South ministerial gathering. This is on the agenda and has not been put on the long finger. The project will go for planning and I am confident we will see it completed, although I am not able to give a definite date for the Deputy. I know how interested Deputies are in it.

Deputy Sandra McLellan: I am glad it is progressing and we might have a date soon for completion, or even the beginning, of the project.

The answers: the core issues

On Problem 1, there was no good news: while the senior minister, Jimmy Deenihan, avoided making any comment on the economic justification for the project, Dinny McGinley said:

I agree with the Deputy’s comments that completion of this project would bring great economic benefit to the area. […] Completion of the project would bring great benefits, as tourist activities such as boating are popular these days.

That there might be costs as well as benefits, and that the two might usefully be compared, does not seem to have struck Mr McGinley.

On Problem 2, the riskiness of investment for local businesses, nothing was said directly.

On Problem 3, whether the thing will ever be built, there was mixed news. Jimmy Deenihan, the senior minister, gave nothing away, but Dinny McGinley said “This is a North-South project to which we are committed.”

When it came to the practicalities of funding, though, the written answer was clear:

I intend to explore all possible options that may assist in the advancement of this project but it must also be recognised that the Government is engaged at present in a comprehensive review of expenditure, under which all spending is being examined rigorously.

In other words, there is no money for the project and its supporters should prepare themselves for bad news.

How the project was to be funded

The really interesting part of the answer, though, is what it says about how the project was to be funded. As I explained, former minister Éamon Ó Cuív ruled out volunteer input, European funding, user charges and public-private partnerships: he was determined that the project be carried out by Waterways Ireland. The North–South Ministerial Council was told in October 2007 that

[…] the full capital cost (estimated at €35m/£23.8m) of the project will be met by the Irish Exchequer […].

For some reason (perhaps because of former Taoiseach Brian Cowen’s comments reported here), some folk got the idea that the €35 million (itself only a very crude estimate) had been set aside, ring-fenced somehow, to pay for the Ulster Canal. That notion seems to be based on a misunderstanding of Irish government budgeting, which is done year by year, which is why the written answer had to point out that

[…] Government accounting procedures do not provide in that sense for ring-fencing funds for projects of this nature.

That is why I have been concentrating on the absence of any provision for the Ulster Canal in the annual capital allocations within the relevant departmental budget.

But the more interesting point is this. In July 2010 Craggy Island, then the responsible department, told me:

There is some uncertainty in the current economic climate about whether the cost will — as was intended — be met by sale of Waterways Ireland assets in Dublin (where there is some property vested in WI that has commercial potential).

I had not been aware of any such intention, so I searched for evidence. I did find one mention of it in the Dáil in October 2008:

The restoration of the south west stretch of the Ulster Canal, from Upper Lough Erne to Clones, is being funded from within Waterways Ireland own resources.

But that was at odds with the same minister’s statement in the Dáil one year earlier:

The first phase [Lough Erne to Clones] will be totally funded by the Exchequer and will take approximately six years to complete.

Furthermore, it was at odds with the evidence of the minutes of the North–South Ministerial Council, with statements from Waterways Ireland, with the provisions of the Waterways Ireland Implementation Body Financial Memorandum (2005) and with a ministerial statement that Waterways Ireland would own the waterways assets.

Here is what the current minister says:

I am advised that it was always the intention that the Ulster Canal project would be funded from the Waterways Ireland annual allocations, as agreed through the annual Estimates processes in this jurisdiction, as well as the deliberations of the council with regard to annual budgets.

I am advised also that it was also a key consideration throughout the process that the Ulster Canal project would be supported by a significant level of projected income from the commercialisation of certain Waterways Ireland assets, a scenario that was affected negatively by the economic downturn.

We may take it, then, that (as the great Ron Ziegler used to say,

This is the operative statement. The others are inoperative.

The sale of assets is not mentioned and “income from commercialisation” (never before mentioned, as far as I know) is now said to have been intended to play only a supporting role. In other words, in its previous communications to me, Craggy Island was bullshitting.

Which might explain why it refused to let me see the files, even in response to FOI requests.

The answers: peripheral issues

Of course the government can’t just come out and say “The Ulster Canal is dead”: it has to pretend that there is still hope (the department is probably buying lottery tickets). Hence this:

Notwithstanding that, the Minister asked my Department to keep in regular contact with Waterways Ireland with a view to advancing the project to the extent possible within the current constraints. In this regard, the Deputy will be aware that Waterways Ireland is in the process of finalising documentation to proceed to the stage of submitting an application for planning permission, which is a significant milestone for the project.

In other words, there is enough money to pay for a planning application. Dinny McGinley managed to build that into a whole new story:

I am sure the Deputy would agree that the process has not come to a halt as we are preparing to go for planning permission. The process is moving along but we must be mindful of the economic and financial constraints to which we are subject. Nothing would give me greater pleasure than moving the project on. I know the Minister is very interested in this because it was discussed about a fortnight ago in Armagh at the North-South ministerial gathering. This is on the agenda and has not been put on the long finger. The project will go for planning and I am confident we will see it completed, although I am not able to give a definite date for the Deputy. I know how interested Deputies are in it.

Fine Gael spin

And that in turn gave Heather Humphreys material for a press statement, which the Anglo-Celt (no doubt in a moment of weakness) headlined thus:

Plans for Ulster Canal project imminent.

The newspaper entirely missed the significance of the statement that “funding for the project had not been ring fenced” [ie there’s no money] and reported positively on the submission of the planning application and even the minister’s “intention to explore all possible options that may assist in the advancement of the Ulster Canal project” [ie buying lottery tickets]. Amazing how a press statement can turn bad news [there’s no money] into good.

Sinn Féin economics

One final point. Sinn Féin’s finance spokesperson, Pearse Doherty, has been rather impressive on economic matters, but Sandra McLellan’s Dáil questions suggest a need for more critical examination of the evidence. She overstated the potential benefits and ignored the cost-benefit ratio; she also suggested that, because a large amount of money had already been spent, even more should be poured into the hole.

She invited Dinny McGinley to “give a commitment that this project is a priority”, an invitation which he avoided, but he did, alas, say that the government is committed to the north–south project. She also wondered whether other canals might be taken over by Waterways Ireland: I suspect she was not thinking of the Lombardstown to Mallow Canal but rather hoping to extend northsouthery to waterways in Northern Ireland and perhaps even to the ghastly Erne Canal scheme.

That canal would be in Pearse Doherty’s constituency. I do hope that his civil engineering background, his desire that governments should “invest in the infrastructure of Donegal” and his involvement in “many campaigns to end the marginalisation of Donegal and to bring forward innovative proposals to develop the North West as a whole” won’t lead him to campaign for that scheme. It might seem impossible, but it makes even less sense than the Ulster Canal.

Next: the Ulster Canal and the Irish economy November 2011 in Ulster Canal 16: looking for a stake.