FF cranked up spending to ‘buy’ two elections

SUCCESSIVE Fianna Fáil-led governments cranked up spending to help buy two elections but voters paid the price for these expensive promises.

Pre-election Cabinets sidelined budgetary advice of the Department of Finance and aggressively sought to tighten the country’s belt after being returned to power.

This emerged clearly in the report of the independent review panel on the capacity of the Department of Finance.

It said the programme for government negotiations after the 1997 and 2002 elections, coupled with a generous social partnership process, overwhelmed the budgets which followed.

And, instead of the Cabinet using sound departmental advice to balance competing demands, the report said budgets were essentially designed to sign the cheques for the bills generated by election promises.

The report said the governments’ taxation agenda made for “effective political messages for the electorate, but not good tax policy”.

Moreover, strong economic growth, based on a competitive export performance in the 1990s, created a level of expectation among voters which political parties vied to satisfy.

“This fuelled enormous expectations of government to create spending and tax initiatives to share the fruits of recent economic gains, even as the country’s overall competitiveness degenerated substantially and revenues became unsustainable.

“These pressures were reflected in the political debate of the day where all political parties were eager to meet public expectations for more and better services,” it said.

Bertie Ahern’s Fianna Fáil-Progressive Democrat coalition began preparing for the 2002 election incrementally. In June 1998, the department recommended an additional budgetary spend of approximately €600 million. Finance minister Charlie McCreevy’s subsequent package overshot this by close to €500m.

A year later, the department again suggested €600m in extra tax and social welfare perks. Mr McCreevy’s budget spent €1 billion more.

For 2001, the same minister committed to an extra €2.6bn after the department had called for €1.7bn.

That year Mr McCreevy softened up the electorate for a vote.

The minister’s €4bn giveaway allocated an extra €1bn in social welfare, child benefit rose by €31 a month to €86, the over 70s were all given medical cards and both tax bands were reduced by 2%.

The same year, Mr McCreevy committed to the additional benchmarking in the Programme for Prosperity and Fairness.

In the last budget of the election cycle, despite an international recession, he went over and above the department’s advice by €600m.

The pension was beefed up by €12 and 68,000 workers were taken out of the tax net.

When the dust settled, Bertie Ahern called the election for May 17, 2002, and Fianna Fáil saw its share of the vote rise to 41% and, with 81 seats, it got within spitting distance of an overall majority.

It still needed a coalition partner. So it welcomed back the Progressive Democrats who had doubled the number of its TDs.

As soon as the new Cabinet met, the Department of Finance submitted its recommendation to spend an extra €800m to following year.

With the election over, the new government went on to announce measures which were even more prudent than the department’s.

For 2003, the coalition spent less than the department calculated for the only year between 1999 and 2008.

The same incremental crank up began again as the 2007 election loomed. Predictably, the budget for that election year produced the most generous package of the 29th Dáil over and above Finance’s advice.

After signing the cheques for 2005, to a greater extent in 2006 and most emphatically in 2007, the country went to the polls and Fianna Fáil was returned for a third term in power. It boosted its first preference share to 41.56%.

This occurred after finance minister Brian Cowen’s pre-election budget saw mortgage interest relief doubled, €501m worth of tax credits introduced and the higher tax rate fell.

One year earlier, a €1,000 childcare supplement was created, child benefit rose to €150 a month and the state pension increased by €14 in an additional €1.12bn welfare parcel.

With 78 seats, it was given a mandate to negotiate yet another programme for government.

And, just as night follows day, austerity followed eager election budgets. As a result, the government did its best to stick to the department’s advice for the first time since after the 2002 election.

The independent report said the programme for governments delivered political stability but were spared a “full economic or fiscal analysis by the Department of Finance”.

As a result the summertime memoranda, pleading for restraint, were ignored in favour of the plea of the electorate which Bertie Ahern could hear coming every five years.

Neither of the two parties engaged in the latest round of programme for government negotiations would explicitly commit to subject their fresh document to this type of verification.

Voters bought the product. They could again pay the price.