How can voters make sense of the billions of euro worth of election promises and the charges and countercharges about who can be trusted with the State’s finances?
The billions
All the promises do add up. Adding promises on day-to-day spending, exchequer investment and tax packages (cuts minus increases) gives a “promises” total of €34.3 billion for Fine Gael, €38.7 billion for Fianna Fáil and €49.3 billion for Sinn Féin. There is a touch of comparing apples and oranges here, as the parties lump in some once-off items with a lot of recurring spending. But it does give a basis for comparing what they are offering.
The backdrop
Adding in these promises will increase the overall level of government spending above the plans outlined by the Department of Finance after the budget. Exchequer annual spending voted through the Dáil will rise from just over €100 billion this year to about €144 billion by 2030 under the Fine Gael and Fianna Fáil plan or €155 billion under the Sinn Féin plan, according to a blog post by TCD assistant economics professor Barra Roantree. There is a significant amount of State spending not included in these totals in other areas but the manifestos do not allow a wider comparison including these.
How they compare – the similarities
The size of the State will grow rapidly, as it has in recent years, under all the plans, as spending growth exceeds inflation. All the bigger parties are devoting much more to higher spending than to cutting taxes and their overall totals for day-to-day spending growth are not markedly different, even if the details are. In terms of the smaller parties, Labour says it believes the party’s plans can be accommodated with annual spending growth of just over 5 per cent and has avoided a long list of promises, while the Social Democrats cost their spending promises at €18 billion, including ongoing spending and once-offs and say their focus is on this rather than tax cuts. Aontú promises to hold spending growth at 5 per cent and push for big universal social charge (USC) cuts.
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How they compare – the differences
There are notable differences in tax. Fine Gael plans to devote more resources to this area, counting tax cuts minus increases. Meanwhile, the Sinn Féin tax plan, while its overall cost is modest enough, involves significant cuts on one side and increases on the other.
But the really big difference is in State investment spending, where Sinn Féin promises to allocate significantly more than the other two big parties. This amounts to €10 billion in additional exchequer annual spending. And the party also promises to increase annual State investment by a further €10 billion in financing, mainly aimed at approved housing bodies. This adds up to a really significant difference over the term of the next government; Roantree calculates that Fianna Fáil and Fine Gael are planning to allocate a cumulative amount of about €120 billion to State investment over the period of the next government up to 2030. This is €15 billion to €20 billion more than the plans published by the Department of Finance a month ago in total capital spending. Sinn Féin are pledging to spend €170 billion. Most parties allocate the €13 billion Apple tax windfall in part to boosting housing provision, though the Green Party highlights the option of spending a lot of it on public transport.
Will it all work?
There are real questions about the ability of whoever is in government to ramp up State investment spending quickly. There is little spare capacity in the construction sector – or anywhere else in the economy for that matter. Roantree says that a key issue for the parties is: “how are you going to deliver the extra investment you’re promising without (further) pushing up prices in the construction sector?” He points out that a key dilemma for the next administration is that huge investment in housing, energy, water and social infrastructure is needed, but there are big constraints on delivering it.
Is it affordable?
We don’t know. Corporate taxes could continue to grow. An aggressive approach to tariffs by the Trump administration could lead to a fall-off. The two main parties in the current Government are promising to continue to keep the budget in surplus and put €6 billion to €7 billion each year into two funds to support investment in future. Sinn Féin will not commit to the contributions to these funds set down in legislation, but will put whatever budget surpluses emerge into the funds. The party forecasts that these will amount to €15 billion over the five-year term of the next government.
This has led to sharp clashes as Fine Gael claims Sinn Féin want to raid the national piggy bank. The main Opposition party says this is untrue as it is not planning to “raid” the funds, just put less money into them.
The key point is that by planning to spend more and set aside less, the Sinn Féin plan leaves significantly less room for manoeuvre if the State finances take a turn for the worst. And a big question for all the parties is what their priorities would be if this happens. The Department of Finance estimates that about €15 billion of the annual tax revenue from corporation tax by next year will be “windfall” in nature – in other words not linked to real activity here. If even a half of this windfall element were to disappear, a lot of the manifesto promises would simply become unaffordable.
Promises, promises - compare the party manifestos
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