Noel Whelan: Volatile vacuum at heart of Fine Gael’s fiscal space

McHale is telling the Government that if and when additional money comes along most of it will already be committed to new overheads

The phrase ’fiscal space’ is being used a lot these days by politicians, economists and media commentators. We asked some members of the public if they knew what it meant. Video: Bryan O'Brien

 

An incumbent government usually holds all the cards at the start of an election. Not only does it get to choose the moment when the election will happen, but it also gets to control the news agenda in the weeks and months leading up to the dissolution.

Ministers have first call on the attention of journalists, especially political correspondents. Government backbenchers have best access to local media who crave constituency announcements.

The government also has at its disposal a massive army of State-funded press operatives and advisers busy generating a steady stream of launches and relaunches at national, regional and county level for initiatives in all policy areas.

It is not surprising, therefore, that, with so much good economic news to go around, the current Government has had an easy ride for most of the “phony war” which preceded this election campaign.

It has not had it all its own way, however. The Opposition has managed to put a few bumps in the Government’s path. Fianna Fáil picked up on comments Enda Kenny made admiring the US tax system and used it well to depict Fine Gael as ideological and economically divisive. Micheál Martin also managed to call Fine Gael on its suggestion that there was no alternative government by pointing out that in this Republic the electorate don’t do coronations. Along with Sinn Féin, Independents, and the smaller parties, Fianna Fáil has also confronted the Government on homelessness and hospital waiting lists.

Over-promising

However, every more difficulty has been caused for the Government by the Fiscal Advisory Council. The assertion by Prof John McHale last week that politicians were overestimating the “fiscal space” which may be available to the next government was timed before the campaign began and was aimed as a shot across the bow of all parties who were over-promising. It had most impact on the Government and on Fine Gael in particular.

The role which the Fiscal Advisory Council has played is akin to that which the independent Referendum Commissions played in recent referendum campaigns. As calm, careful and independent arbitrators of fact, they have carefully corrected misinformation in campaigns.

In the 2011 Oireachtas Inquiries referendum, for example, Referendum Commission chairman Judge Brian McMahon provoked the anger of Ministers when, contrary to Government suggestions, he pointed out that the proposed amendment would make judicial review of Oireachtas inquiries almost impossible.

Similarly, in the 2013 Seanad referendum the Referendum Commission played a key part by drawing attention to correspondence from the Houses of the Oireachtas which revealed that the figures about savings which Government posters suggested would arise from abolishing the Seanad were inaccurate.

Having false assertions questioned by independent experts in this way undermines the credibility of any group or party which is exposed as misleading voters.

The suggestion implicit in what MacHale has had to say is that there is a volatile vacuum at the heart of Fine Gael’s fiscal space. The intervention, and the Ministers’ incoherent response to it, has put the Government on the back foot.

The term fiscal space is economic jargon but it can be described as a hoped-for increase in national disposable income. Every householders knows what disposable income is namely the money they might have left each month after standing outgoings such as taxes, mortgage, groceries, car costs and the like are paid. Every householder also knows that predicting future disposable income is precarious.

In some ways Michael Noonan, Simon Harris and their colleagues are akin to a husband who, after a few years of household austerity, sees new family income in the pipeline and immediately starts eyeing up a new car, booking foreign holidays or, worse still, promising the kids new gadgets or other goodies.

Prudent wife

Meanwhile, McHale and his colleagues are like a more prudent wife who has to point out that the kids are getting older and will cost more to feed and cloth, that educating them is going to be more expensive, or that the couple’s parents are ageing and their will be additional healthcare costs.

McHale is telling the Government that if and when additional money comes along most of it will already be committed to new overheads.

Ministers have initially been dismissive of the council’s warnings. This is a precarious stance for parties seeking to be re-elected for economic competence and prudence. The risk for the Government, and Fine Gael in particular is that their overall credibility will be undermined. The public may come to think the Government is over-promising to get re-elected or being foolhardy already with the country’s new-found recovery.

We are only on the first stretch of a three-week race and, whatever about Labour, Fine Gael is certainly the strongest runner in the field. Yet it is surprising to see it make such a bad start.

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