Notes on the Front

During elections there is always a danger of promise-inflation.  But Fine Gael is looking to be the most inflationary of all.  They have promised increased public spending increases, tax cuts, budget surpluses and higher investment.  All interesting until you start looking at the details.  Let’s look at primary current public spending (excluding capital investment and interest payments).  This is the area that will fund improvements in health, education, childcare, public transport, etc.

Fine Gael is basing their promises on the recent economic and fiscal projections published by the Department of Finance.

The Government / Fine Gael is projecting spending increases of €11 billion.  However, €3 billion of that is pre-committed – mostly from the impact of demographics (e.g. an older population and health care).  When this is factored in, the projected increase in current public spending is €8 billion over the next five years. 

However, inflation eats almost all this away.  The current spending increases amount to a 10.7 percent increase over the five years; inflation will over run at 9.8 percent.  In essence, this spending increase amounts to running to standstill with no real (after inflation) increases.

And when we factor in population growth (over the next five years, population is projected to increase by 250,000), we find that the promised spending increases actually end up falling – by nearly four percent.

So a promised spending increase actually ends up being a spending cut.

Of course, any party in office could easily rectify this:  by reducing the level of projected tax cuts (Fine Gael is promising €3 billion over the next five years); by finding new revenue streams; by reducing the projected high levels of the budget surplus. 

However, as an opening bid, Fine Gael is promising spending increases which on closer examination are anything but.

With election promises, sometimes the sun is not so warm, the moon not so bright and the stars can be a very long ways away.