ANALYSIS:An absence of detail on inevitable and unpopular cuts casts a shadow over plan, writes DAN O'BRIEN

FINE GAEL yesterday set out its budgetary stall for the next half-decade – the last of the main parties to provide detail on how control of the public finances can be regained.

At the launch of its fiscal plan, the party’s finance spokesman Michael Noonan was at pains to differentiate between his party’s plans and those of all others. He identified two big differences: the first was a focus on cutting spending rather than raising new taxes as a means of closing the gaping hole in the public finances; the second was a claim that only his party has a strategy for jobs and growth.

The first claim is truer than the second. Fine Gael is positioning itself as the (relatively) low tax party by promising almost €3 in spending cuts for every additional €1 it raises in extra tax revenue.

With the Labour Party offering an equal spending cut/tax raising split and Fianna Fáil a two-to-one split, Fine Gael is selling itself as the party of small government.

Signalling intent is one thing; setting out a realistic path to achieving objectives is another.

Do Fine Gael’s figures add up?

Surprisingly, the party did not include any economic growth forecasts in its document. This omission raises questions.

The Government and the Labour Party have based their budget figures on published forecasts, both of which are plausible. From what can be gleaned, Fine Gael’s assumptions are less plausible because they are based on Economic and Social Research Institute figures – from last July.

Back then, the institute’s low growth scenario for the period to mid-decade, used now by Fine Gael, was a comparatively pessimistic outlook. Now it is on the optimistic end of the spectrum of forecasts because it has not been revised to account for greater austerity, as have all more up-to-date forecasts.

Another reason that may make the plan less credible is the absence of spending cuts that will be unpopular – nearly all are measures focusing on curbing profligacy and waste.

In all countries at election time political parties in opposition promise to save taxpayers’ money by cutting waste. In Ireland’s case now, there is certainly plenty of scope to reduce waste owing to poor budgeting practices that allowed boom-time spending to soar without any real evaluation of its effectiveness. But to promise €6.5 billion in cuts over three years while promising no involuntary redundancies in the public sector – and no reductions in the protection of the vulnerable – makes one pause for thought.

Enhancing Fine Gael’s credibility has been its identifying of weaknesses in the budgetary process ahead of other parties, and its well-designed proposals for the introduction of best practice.

Yesterday’s document summarised its plans for a radical overhaul of the mechanism at the very heart of government – the Department of Finance.

It also flagged the future conduct of a “comprehensive spending review” to prioritise where meagre resources will be allocated. In this it is at one with its likely coalition partner, Labour.

Both parties have sounded serious about squeezing some inertia out of the budgeting process. This augurs well for real change at the department.

Real change in Merrion Street does not augur so well for the department’s underperforming and less reform-minded officials. They have long been fearful about the changes a new regime might introduce. Yesterday’s announcement will not make them sleep any easier. Fine Gael said it will recruit “an economist of international repute” to run one of its most important divisions. The arrival of such an outsider, who may well be foreign, would be an even greater shock to the system than previously anticipated.

Yesterday, Michael Noonan’s second plank to differentiate Fine Gael’s product from everyone else’s was the party’s plans for growth and jobs.

On reforming the labour market in ways that could help create jobs and reduce unemployment, Fine Gael has produced the most detailed and economics-informed plan.

The measures are what economists call supply-side policies. On the demand side, Fine Gael’s plans to create jobs (and generate growth) by spending more are built on shakier foundations.

Fine Gael says it will spend €7 billion on infrastructure. As this is to be funded from the National Pension Reserve Fund and privatisation receipts raised from the sale of State-owned assets, it is designed not to annoy the EU and IMF troika by delaying the meeting of deficit reduction targets.

The combined cost of all growth-enhancing spending pledges made by the political parties amount to multiples of what remains in the fund. And if Alan Dukes is even half right on the final cost of the banking failure, the rescuing troika may insist that every last cent of it is cast into the bottomless banking pit. That would leave all the parties without the cash to deliver on their pension-funded promises.

Another potential pitfall for Fine Gael relates to privatisation receipts. The EU-IMF will have a veto on how these funds are spent. They may want the money to be used to pay them back before they are ploughed into forestry and broadband, as Fine Gael proposes. Such are the constraints of a loss of sovereignty.