Labour and the PDs are the most prudent on the public finances, according to an analysis for The Irish Times by Goodbody stockbrokers. John McManus reports
The Labour Party economic manifesto emerges as more economically prudent than either Fianna Fáil's or Fine Gael's, according to an analysis carried out by Goodbody stockbrokers for The Irish Times.
The main finding of the analysis is that of the four main parties the Labour and the Progressive Democrats' economic plans will keep current spending under the tightest control, based on what they say in their manifestos.
The analysis, by Goodbody's chief economist, Mr Colin Hunt, focuses on the core area of day-to-day spending under the discretionary control of Government departments and ignores spending on items such as National Debt interest.
The impact of economic growth - which can distort the figure for growth in spending - is also stripped out. What is left is a measure of how the growth in day-to-day spending on public services compares with the rate of economic growth. If spending exceeds growth, then policy is loose.
Although both Fianna Fáil's and Fine Gael's economic strategies will cut the growth rate in core day-to day spending to less than the rate of economic growth next year, their plans would see spending increasing faster than growth in the following years, although by less than 2 per cent a year. The other two parties' economic plans would see supply services spending grow less rapidly than the economy every year from 2004 onwards, with the Progressive Democrats adopting the tightest economic stance.
The impact of the parties' massive investment plans is also compared. The four parties plan to invest between €33 billion and €56 billion over the life of the next government. The key figure used to compare the credibility of the plans is the impact on the General Government Balance, an EU measure of annual borrowing.
The Goodbody analysis finds that the GGB will remain either at balance or in surplus for the life of the next government for every party except Fine Gael. The biggest surplus will be built up under the Progressive Democrat strategy - 3.7 per cent of Gross National Product by 2007.
The Fianna Fáil proposals would produce the largest surplus in the period 2003 to 2004, while the Fine Gael economic strategy produces increasing deficits every year to 2007, by which time the deficit would be 1.6 per cent of GDP. The Fine Gael deficit is still well within the 3 per cent limit set by the European Commission.
Fine Gael said yesterday that the Goodbody model makes some assumptions that have a disproportionately negative impact on its economic projections.
In particular, Goodbody assumes that there will be less money in the Social Insurance Fund than Fine Gael. The SIF is the pool into which social insurance contributions are paid and from which social welfare payments are made. Any surplus is counted towards the GGB.
Putting the Fine Gael figures for the SIF surpluses into the Goodbody model would show them running an annual surplus. However, using these figures throughout the process would show both Fianna Fáil and the PDs running even larger surpluses than the ones currently projected.
The GGD surpluses produced by the Goodbody calculations for Labour, Fianna Fáil and the PDs are already at odds with the parties' own calculations. All three predicted that they would run moderate GGB deficits over the life of the next government. The difference between their figures and Goodbodies' is put down to the use by Goodbody of a lower original spending base than the one employed by Labour, Fianna Fáil and the Progressive Democrats.
The final element of the parties' manifestos that was examined was the impact on the national debt. The size of the debt as a proportion of GDP will fall under all four manifestos.
The biggest decline is under the scenario outlined by the PDs, which would see it fall to 13.6 per cent of GDP from its present level of 31.1 per cent.
The next biggest fall comes from the Fianna Fáil plan which would push it down to 16 per cent, while Labour would reduce it to 17.8 per cent. Under the Fine Gael strategy it would fall to 25.7 per cent, but again the party argues that the Goodbody model is unfair to them in its assumptions.
Commenting on the analysis, Fianna Fáil claimed that it flattered both the PDs and Labour because it assumed that the costs given for their election pledges are accurate.
Labour said the results of the analysis underscored the cautious approach it had adopted.
A spokesman for the PDs said the actual figures were not that relevant. "The key thing is who is the most fiscally prudent and credible. If your budget strategy is not creditable all your manifesto pledges are worthless," he said.