Is costing of electoral promises a must?

Political manifestos

By Prakash Neerohoo

At the May 1st political meeting, the opposition alliance Labour-MMM-New Democrats announced a list of 20 electoral promises. Since then, there has been a debate among some economists in the media about whether political parties should do a costing of their electoral promises and identify the revenue sources to be used to fund the implementation of those promises.

Pic – Economic Times

This debate is quite new in the country’s political annals. Since the 1976 elections, when a major promise to introduce free secondary education was made by the Labour Party, all kinds of electoral promises have been made by parties of all political stripes without providing any costing. Never have we heard such calls for parties to provide a costing of their electoral promises before elections. What is different this time?

It is fair enough for economists to be concerned about costs, but when the ruling party questions the Opposition’s promises on the grounds of missing costing, we must take this criticism with a pinch of salt. Probably, the stakes are higher for both the ruling party and the official Opposition in the run-up to the next legislative elections (likely to be held after the incoming budget 2024-25) and they are both scrutinizing each other’s promises with careful attention to detect any pitfall or sign of demagogy.

In this paper, I do not intend to discuss the merits or demerits of the 20 proposed measures as that would require an in-depth analysis based on the intended underlying economic policy framework, which we understand will be laid out in a forthcoming manifesto. I would rather focus on the costing issue. I would respond to two criticisms we have heard so far in reaction to the promises made.

First criticism

The first criticism is from good-thinking people who say that the promises are not credible because they are not costed, having regard to budgetary constraints and debt limits for government’s current expenditure.

My response to this criticism is that costing of electoral promises before elections has never been part of the political tradition in Mauritius. Of course, tradition can be changed but that requires the exercise of responsible citizenship by each and everyone. Does the electorate want short-term gains and benefits or is it more concerned about the long-term future of the country, which requires a sustainable Welfare State amongst other goals?

Over the last ten years, politics in Mauritius has assumed a transactional nature with the end of ideology. All parties claim to be social-democratic and support the present economic system. What differentiates them is not economic policy but the governance approach. Some parties would like more transparency and accountability in governance than others. Some would like more independent institutions for effective rule of law than others. In the absence of paradigmatic proposals for change, all parties have embraced transactional politics whereby electoral promises are made to cater to the needs of different segments of society (youth, old age people, civil servants, women, etc.) in line with political segmentation marketing.

Parties seek short-term political gains to win power, which could serve as a leverage to maintain the status quo or bring about much-needed societal change. It is hoped that this time Opposition parties would lay out a clear alternative vision for the country in terms of development model, governance methodology and social policy (education, health, Welfare State) to be consistent with their wish for a “rupture” with the status quo. Until we see this kind of serious thinking over fundamental issues, we must face transactional politics with a critical mind.

Costing of electoral promises is not rocket science. Provided we have all relevant data, all promises can be costed. We can take a few promises to illustrate this point.

1. The promise to provide free Internet to all households (375,000) would cost Rs 2.25 billion per year at the rate of Rs 500 per month for Internet connection at 50 Mbps.

2. Using MRA data on tax-filers, we can estimate exactly the cost of exempting the first Rs 1 million of revenue from income tax or the cost of exempting income earners in the age group 18-28 years from income tax.

3. The cost of providing free public transport to all users can be estimated by using the present subsidy formula used to compensate bus owners for providing free transport to students and old age people. If evaluating ridership per day or per month is difficult, government can rely on audited financial statements of bus companies to look for operating cost data, which can serve as a basis for estimating national cost.

If costing is not a difficult exercise, the harder part is raising additional revenue needed to fund the promises. Are present sources of tax revenue (income tax, VAT, commodity taxes, excise duties, CSG) sufficient or should new sources of revenue be explored (property tax, capital gains tax, dividend tax, etc.) to cover the present budget deficit? Can public expenditure be reengineered to avoid wastage of public funds and eliminate discretionary expenditure where possible? If any government’s policy is to provide a generous Welfare State, social policy must be funded by a broad-based and well-balanced tax system, which levies taxes on Income (both personal and business), Property (both rental and owner-used), Capital (sale of capital assets) and Consumption (VAT and commodity taxes).

The sustainability of the Welfare State raises fundamental issues of fairness and equity (universal benefits versus targeted benefits), methodology to help vulnerable segments of society (a handup versus a handout) and redistribution of wealth (subsidizing the rich versus subsidizing the poor only). These issues cannot be avoided if we want an effective social policy.

If we were to demand the costing of electoral promises as a pre-electoral rule, it should apply to all political parties. The whole process would first and foremost start with a Fiscal Responsibility Act that prevents a sitting government from making all kinds of promises or unwarranted expenditure before an election, by respecting specific budget deficit targets (for example, no more than 3% of GDP) and debt limits (for example, a Debt/GDP ratio of 60%) that are enshrined in law.

Even if the outgoing government announces new social measures in the forthcoming budget with estimated expenditure and revenue, that does not prevent the ruling party from making additional electoral promises outside the budget once Parliament is dissolved. This has been the case in previous years (promise of free education in 1976 election, promise of limited free public transport in 2005 election, promise of an increase of Rs4,500 over the old age pension of Rs 9,000 in 2019 election). We cannot hold the Opposition accountable for its promises while letting the ruling party off the hook for making promises based on dubious estimates of expenditure and revenue (always resulting in deficit financing).

In some countries, by convention and not by law, political parties get an independent third party to cost their electoral promises in order to give them some credibility. For example, in Canada, before an election, parties submit their political manifestos to the Parliamentary Budget Officer, an independent authority, for evaluation and costing. This exercise is highly reliable and credible because the Parliamentary Budget Officer, in its evaluation of government expenditure or party electoral promises, is not accountable to any single party but to Parliament only. He is appointed by Parliament, not by government. Can we adopt such a convention in Mauritius pending the introduction of a Fiscal Responsibility Act? I am sure there are enough independent economists and/or accountants to do this job.

Second criticism

The second criticism we have heard is that levelled by some ministers, who stated that the 20 promises smack of demagoguery and do not rely on credible estimates of expenditure and revenue.

My response is that the same criticism can be levelled against the ruling parties that made promises at the 2019 elections without providing any costing. To those who have a short memory, let me remind them that those parties then promised to increase the old age pension from Rs 9,000 to Rs 13,500 by 2024, to abolish the property tax in cities, to provide a grant of Rs 100,000 to taxi owners, to revise upwards the salaries in the civil service, etc. At that time, no estimates of how much the promises would cost were produced. No estimates of additional revenue needed to fund the promises were made either. Subsequently, private sector employees were hit with a payroll tax (CSG) to fund retirement benefits, including the old age pension which is a social benefit.

In terms of responsible expenditure or promises, I don’t believe that the ruling parties can give any lessons to Opposition parties, considering the wastage of public funds that is exposed by the Director of Audit every year in his annual report, based on undisputed facts and figures. Not without mentioning the big financial boondoggles like Côte d’Or stadium (Rs5,3 billion), Safe City Project (Rs 19 billion) and Metro Express (Rs 20 billion), amongst others, which have increased public debt to Rs 525 billion (81% of GDP). While there may be valid reasons for these projects, we have yet to see any reliable cost-benefit analysis.

Mauritius Times ePaper Friday 24 May 2024