There’s one question which none of the political parties want to answer

Labour’s finance spokesman Ged Nash wins the prize for quote of the campaign trail so far with his comment that Fine Gael was starting “to look like a Charlie McCreevy and Brian Cowen tribute act” with its election promises. The commitment by Simon Harris to put €1,000 into a fund for every newborn baby was the spur, an ill-judged promise which deserved – and got – the pushback that the cash would be better spent addressing child poverty. Nash’s reference to Cowen and McCreevy was designed to spark memories of the run up to the financial crash and the subsequent pain of austerity. There is more than a whiff of 2007 off key aspects of the manifestos, based as they are on calculations that the good times will keep on rolling.
Labour’s own programme was more sober than those of the bigger parties, with the party saying it believed its promises could be kept within spending plans already outlined by the Department of Finance, though also including a slightly higher alternative level of increase as well, perhaps with post-election coalition talks in mind. Looking at the more lavish promises elsewhere, we might reflect that when the traditionally big-State Labour Party are the cautious ones on spending, we know we have problems. Meanwhile, Sinn Féin has thrown the kitchen sink at extra State investment spending, with Mary Lou McDonald responding to warnings about potential economic bad weather ahead by saying that it “it’s raining now for so many families and for so many communities”.
As the main Opposition party doubled down on its plans, the Cabinet was briefed about potential economic trouble ahead as Donald Trump takes office. It would be terribly cynical to suggest that, even though these warnings are entirely credible, this was a ready-up designed to worry voters and allow Harris and Micheál Martin to up their attacks on Sinn Féin’s programme.
There are two problems with the lavish election promises. One, in relation to the investment plans, is persuading us that they can actually be delivered in an economy at full capacity. Did you see the employment figures from the Central Statistics Office during the week? They showed the total number of people at work rising by nearly 4 per cent over the past year to close to 2.8 million, with an unemployment rate of 4.5 per cent. It is vital that whoever is in government manages to deliver new housing and other infrastructure, but actually doing so at a time when the economy is running so hot will be really difficult. The conundrum is that we need new economic and social capacity in so many areas, but that delivering it risks building up another boom-to-bust cycle.
The other issue is where the money will come from to pay for it all. In terms of the manifesto details, Fine Gael and Fianna Fáil have built in some leeway – for example by committing to continue to put about €7 billion a year into two funds for the future – while Sinn Féin, due to its large investment plans, leaves less, though it does still target budget surpluses. The further the boat is pushed out, the less scope there is to react if something goes wrong. Sinn Féin’s plan may not quite be the raid on the national piggy bank that Fine Gael claims it is, but it does use the vast bulk of the available resources to boost spending, particularly on State investment, and so would require the most adjustment if tax revenue growth did fall off.
And the question which none of the parties will answer is how they would cope if corporate tax took a hit, perhaps due to policy changes in the US. What would be their priorities if, say, these taxes fell back to 2020 levels of about €12 billion year, less than half current levels? According to the Department of Finance, this would immediately push the exchequer finances into deficit, whatever way that is measured. As the Leaving Cert paper might say: discuss.
Even if this does not happen and corporate taxes tick over, it is unlikely that Ireland will be able to afford both lower taxes and higher spending over the term of the next government, yet that remains the chosen formula. We have seen a game of poker in the budget promises – “I’ll see your VAT cut for hospitality and raise you with cheaper electricity as well.” The USC – a key revenue-raising measure after the crash – is being chipped away at, or slashed, depending on what manifesto you tune in to. Sinn Féin would abolish the local property tax and the cost-of-living debate has led to promise of tax cuts on polluting fuels. The tax base is now precariously narrow, reliant on maybe four or five large companies and a small cohort of higher paid income tax earners for a huge chunk of revenue. Increasing the bet further on these sources would be just silly.
Voters may well be ignoring a lot of the promises, conscious that, once they go into the mixer of coalition talks and then the reality of whatever the public finances look like next year, many will be no more. Indeed, the two larger current parties of Government may have damaged their own credibility with their string of goodies, while Sinn Féin appears to have moved back to its more traditional target base and may reckon it is unlikely to be in the next administration. The Independents, free to focus on specific issues, could stand to benefit. The two big parties are cautioning voters to avoid the Independents option for the sake of stability, but having themselves tried to have it both ways by preaching stability and making lavish promises, many voters are unlikely to pay much notice.
For the next week, watch as the Government parties put on grim faces about the economic dangers on one side, while continuing to promise election goodies on the other. They know well that the public finances boom faces some big threats, that the same old problems of actually delivering more houses and a better health service remain and that many promises will be quietly shelved. But for a few more days the election campaign Mardi Gras will roll on regardless.