Voters ill-served by reluctance of parties to consider worst-case scenarios

 

The electorate deserves to have an idea of what parties would do if the economy does not grow, writes DAN O'BRIEN

THE POLITICAL parties are beginning to serve up the meat and potatoes of their plans for government. Yesterday, the three largest parties sent out many of their biggest hitters to talk about where the economy is now, where it is likely to go in the years ahead and how they intend to manage its future course.

Minister for Finance Brian Lenihan was first to the lectern yesterday morning. He cut a solitary figure in Fianna Fáil headquarters when giving a (very) general talk on his brief. In the nearby election HQ of the other Civil War party, Fine Gael leader Enda Kenny later launched the weightiest document of the day – a 44-page hodgepodge of proposals on jobs and development – flanked by two of the parties most economics-minded frontbenchers: Richard Bruton and Leo Varadkar.

But the most economically (and politically) important policy statement of the campaign so far was yesterday’s Labour Party budgetary strategy. Given that the party appears almost certain to have its hands on the levers of power within weeks, its tax-and-spend plans will have a big influence on whatever programme for government is negotiated after the votes are counted.

When Eamon Gilmore stepped up to the podium in party headquarters to launch the plan, with four of his colleagues huddled around him, he was fired up. A torrent of anti-ECB rhetoric quickly flowed. At times he sounded as if he was gearing up to invade Frankfurt, the home city of ECB.

Quite apart from distracting from what the party was proposing on taxing and spending, the outburst was another absurd upping of the stakes in the bailout renegotiation charade. The content and tone of Gilmore’s introductory remarks were reminiscent of speeches to a British Conservative party conference on a day of especially heightened Eurosceptic fever.

Gilmore is a serious and intelligent man. He was neither of those things yesterday. Utterances made in this campaign will echo far beyond this country’s shores in a way they have never done in previous campaigns. They could have serious consequences. It is to be hoped that he tone down this rhetoric.

At the same event was the party’s finance spokeswoman Joan Burton, who didn’t follow Gilmore’s Frankfurt-bashing lead, but focused on the substance of the proposals and introduced the party’s economic and budget forecasts.

The economic growth rates that form the basis of the Labour Party’s budgetary projections are as good as anyone’s – they are very similar to those of the Economic and Social Research Institute, but below those of the Government.

Yesterday’s projection also provided more detail on the 50:50 tax-to-spending deficit reduction strategy the party had previously announced, but not enough detail to say for certain whether the sums all add up.

At least one set of projections looked questionable. Despite expecting the economy to grow less strongly than the Government and despite the party factoring in its slower pace of deficit reduction, it still managed to forecast a national debt in 2014 of 106 per cent of gross domestic product (GDP). The IMF, for which the Labour Party appears to have developed considerable admiration, believes it will be 124 per cent of GDP.

If all the numbers are not fully convincing, there were no shortage of good policy proposals. One is the party’s intention to conduct a “Comprehensive Spending Review”, which, if followed through on, would be a welcome introduction of structural assessments of public expenditure. The less than discriminating across-the-board compression approach to spending cuts, taken by the outgoing administration, has, in many cases, treated worthy budget lines in the same way as ones that should be the focus of much more ambitious reductions, such as, for instance, spending on legal services and pharmaceuticals.

Labour also promises to introduce cost-benefit analyses for “major capital projects”. All well-managed European countries do this as a matter of course. The only criticism of the Labour proposal is that it does not include all public spending lines – minor as well as major, current as well as capital.

Also in yesterday’s plan was a proposal to negotiate a three-year economy-wide pay freeze as a way of making the economy more competitive. While Labour Party became disillusioned with social partnership in the Bertie Ahern era, it clearly sees some future for the framework. So does the trade union movement. Somewhat surprisingly Siptu leader Jack O’Connor was prepared to go on record and tell The Irish Times last night that the wage freeze proposal was a “legitimate aspiration” for a party seeking power (he hastily added that he was conceding nothing at this point).

If Labour and some trade unionists are considering reuniting in the big social partnership tent, Fine Gael is not. The party’s hefty document on jobs and economic development had not a mention of it. The omission was deliberate.

Politically, Fine Gaelers do not believe they can hit the ground running next month if the slow-grinding partnership mechanism has to be cold started, cranked up and given time to churn out a deal. They foresee an economy undergoing structural change, with workers shifting out of sectors focused on the domestic economy and into international trade sectors. A one-size-fits-all-pay policy, they believe, will hinder rather than help structural change of that kind.

Although the party won’t set out its detailed budgetary proposals until next week, it was confirmed yesterday that the precise composition of the balance between expenditure cuts and new taxes will be a ratio of 72:28. How Fine Gael will square this with Labour, in the highly likely event that they are negotiating a shared programme for government in one month’s time, will surely be the biggest post-election question.

The interesting stuff in the Fine Gael document yesterday was on how to help the jobless get back to work. Like Labour’s proposals on analysing the costs and benefits of spending, introducing “activation” measures to speed job searches and match employers with jobseekers should have happened long ago, as they have been tried, tested and proved to be effective elsewhere.

Down at Fianna Fáil headquarters the outgoing Minister for Finance was talking more about the past than the future. Lenihan put up a robust defence of his record. He was even more robust in his attacks on the Opposition parties. Given all that he has gone through, one can only have amazed admiration for the man’s politeness, persistence and sheer will to go on.

But it was what he did not say that was so striking. During a 15 minute presentation and a 45 minute question-and-answer session, Lenihan did not set out a single new policy idea for another term in government. Nor did the proposal-free briefing have even the usually obligatory glossy-covered policy document peppered with bullet-pointed targets and aspirations.

That the Fianna Fáil behemoth, which has so dominated this State’s government over eight decades, could not summon up the energy to copy and paste together a policy paper was yet another sign that it is resigned to its fate of losing power in 21 days’ time.

If Lenihan shares anything with the Opposition parties it is a reluctance to talk about economic outcomes being worse than anticipated. This is understandable, if not necessarily wise. Politicians everywhere want to sound can-do and positive. Negativity and pessimism are not vote winners.

But if recent boom-time elections taught any lessons, the most important should surely be that things can turn out very differently than anticipated. It is prudent to have contingency plans in the best of times. These are the worse of times and it is all too possible that the outcomes will be worse than anticipated.

The pitfalls and obstacles were well illustrated yesterday morning, when a journalist informed Lenihan during his press briefing that the Supreme Court had – in its infinite wisdom – come down against Nama.

There is reason for hope on the economy. And that hope is needed. But to ignore the many risks is to fail to prepare for policy changes which may be required or forced upon a new government.

Having some idea of the instincts of the parties in the event of a failure of the economy to grow or, worse still, if it takes another dip, would be helpful.

It would give voters a better handle on what parties might have to do and make parties better prepared for what John Gormley described as the “asylum” of government in the current environment.


Dan O’Brien is Economics Editor

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