The PDs have sought to bring out some unique selling points in theirplans for the public finances, writes Cliff Taylor
The economic battleground for the election is becoming clear. Gone are the days when parties tried to woo voters with expensive tax packages. This election will centre on how the various parties would fund the necessary investment in key infrastructural projects and how they would pay for - and manage - improvements in services such as health and education.
In their election manifesto, the Progressive Democrats have emphasised some key points of difference in their approach. These are a continued commitment to low taxation, a willingness to sell off State assets to fund State investment in infrastructure and an emphasis on prudent management of the national finances.
The PDs are the first party to publish their full manifesto, but as Labour and Fine Gael have recent economic documents, some comparisons are possible. The most significant contrast is between the PDs and Labour - and it is clear that the PDs are keen to highlight this.
In short, Labour favours significantly higher spending funded by more borrowing. Labour has said it would allow general government borrowing - the borrowing measure used by the EU - to rise to up to 1.9 per cent of GDP per annum to fund higher capital spending and improvements in the health service.
The PDs portray this policy as spendthrift and argue that it would, in fact, be in breach of our commitment under the EU Growth and Stability Pact to keep general government borrowing in balance, or close to it.
This is an area which the PDs clearly intend to highlight during the campaign, though they may be met with Opposition charges about the recent deteriorating in the public finances under the Fianna Fáil/PD coalition.
For the future, the PDs are committing to keeping general government borrowing close to balance. This means they will have less available for State funding of investment projects.
They promise investment of €40 billion over 2003-2007 - including money from the private sector in public/private partnership projects and part-funded by privatisation receipts. Labour's document, meanwhile, promised €48 billion in purely State-funded capital investment over the same period.
The two parties also go their different ways on current spending. The PDs are promising to keep it at the rate of nominal GDP growth (GDP growth plus inflation), which they estimate at 8 per cent per annum.
Labour is budgeting for annual increases averaging 10 per cent, while Fine Gale's projections show a 9.5 per cent annual rise. Given the pressure on current spending, and on public sector pay in particular, even the higher Labour figure will be difficult to achieve for whatever government is in power.
The National Pension Fund, established by the current Government to fund future liabilities, is also emerging as an election issue. Labour has said it would cut the amount the State puts in to the fund from 1 per cent of GNP to 0.25 per cent for five years to pay for higher health spending. The PDs promise to retain the contribution to the pension fund, as does Fine Gael.
Meanwhile, Labour would raise employers' PRSI to pay for extra childcare spending, while the PDs are committed to holding the employers' PRSI rate at its current level or reducing it if necessary.
Much attention will focus on the PD plan to establish a national transformation fund, into which would flow money from the privatisation of State assets and excess Central Bank reserves. This fund could raise up to €6 billion over the lifetime of the next Government to fund investment projects, the party believes.
Is this achieveable? Much would depend on the sale prospects of the State assets identified by the PDs - either to investors through a flotation or to other companies. The ESB might be a candidate for privatisation - though perhaps not immediately - and could carry a significant value.
Aer Lingus, however, is currently heavily loss-making and its market value would now be very low, while plans to privatise Bord Gáis and some of the national ports - other candidates identified in the manifesto - are also unlikely to bear fruit quickly.
A programme of privatisations of State assets is conceivable in the medium term, but the companies themselves have to be able to demonstrate strong growth possibilities in increasingly competitive markets.
The dire performance of the privatised Eircom will ensure that any offering to the market of an Irish State company will face rigorous analysis from institutional investors and a good deal of scepticism from potential retail investors.
Some €2 billion, meanwhile, could be released from the Central Bank's reserves to the new fund, the PDs believe.
While the PDs' manifesto concentrates much of its fire on investment spending, the party also promises some further tax reductions. It says it would reduce the top tax rate from 42 per cent to 40 per cent, reduce the numbers paying at the higher rate and take everyone on the minimum wage out of the tax net. Lower corporate and capital taxes will be retained and the tax treatment on share options will be improved.
Thus the PDs hope to underline their position as a low-tax pro-enterprise party, with the only possible increases being in environmental taxes and charges. Again they hope this will differentiate them - from Labour in particular.
However it is the area of how much the State should spend and how it should manage it which will be central to the forthcoming campaign.
One thing which is striking - though perhaps not surprising - is that all the parties are assuming that economic growth will continue at an annual rate of 5 per cent plus. This may be the current view of respectable forecasters, but there is little chance that growth will be higher and a very real possibility that it will be lower. If this is the case, all the projections on which the election promises are built go out the window.