Auction politics: Can we afford to pay for the parties' election promises?
Smart Money: Cost of public pay and inflation could sharply cut scope for giveaways
There is always a risk is that the parties will try to win our votes with promises funded by money that may not materialise. Photograph: PA
The parties are about to launch their manifestos. And as their basis they will be using updated Department of Finance estimates for the public finances in the term of the next government. These predict that there will be €11 billion in “unallocated resources” in the next five budgets – on the face of it plenty to fund party promises. But “unallocated resources” does not mean money that whoever is finance minister will necessarily have to allocate on budget day to new spending projects or tax cuts. In particular, future public pay increases and other inflationary pressures are likely to eat up a lot of the cash. So the risk is that the parties are going to try to win our votes with promises funded by money which may not actually be there. This is not uncommon for an election campaign, but the parties can’t do this and at the same time claim to be super prudent in their management of the public finances. Here are the things to watch.
1. The background
Budget 2020 was drawn up on the basis of the UK leaving the EU without a withdrawal deal at the end of this month. This now won’t happen. Because of this, the Department of Finance recalculated the budgetary outlook for this year and subsequent years on the basis of a more rosy scenario, which is that the EU and UK will conclude a trade deal and avoid a hard Brexit. Economic growth is expected to be 3.9 per cent this year, falling gradually to 2.5 per cent by 2025 – slower than the growth surge of recent years.