Wednesday 26 October 2016

Putting cash in pockets won't win the election

How voters decide is more complicated than conventional wisdom would have us believe, writes Dan O'Brien

Published 18/10/2015 | 02:30

CRITICISED BUDGET: Fiscal Advisory Council chairman John McHale. Photo: Mark Condren
CRITICISED BUDGET: Fiscal Advisory Council chairman John McHale. Photo: Mark Condren

What will determine who voters plump for when they go the polls in the next few months? The conventional wisdom and the Government's strategy in Budget 2016 are both predicated on the belief that people vote with their wallets - if a government can put more money the way of voters, it will win the day come election time.

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This is, at best, only partly true. People are far more complicated in their motives when choosing a government and are not purely self-interested, calculating machines.

In the US, scholars long ago demonstrated that many people do not vote only or even primarily in their economic self-interest. Other issues, such as the groups with which they identify, and political persuasion are also hugely important, and people often vote against their own financial self-interest. For instance, well-heeled American liberals vote Democrat even though they are likely to pay more taxes, while poor conservatives vote Republic, foregoing the personal gains that would come their way via greater redistribution.

That does not, of course, mean that economic matters are unimportant, something underscored this weekend when Irish scholars of politics met in Cork for their annual think-in. In the vast amount of research on voting behaviour, nobody contests that the economy is always a central issue. But it is much more nuanced than is often believed, with voters combining considerations of narrow self-interest with wider considerations.

When people vote for a party they believe will manage the economy better than others, they are considering not only how much money they stand to gain or lose, but how a better managed economy will be less likely to crash, and how it would benefit their immediate circle of family and friends, the organisations they are involved in, and, indeed, society as a whole.

This is very well demonstrated in a recent opinion survey taken across the 28 members of the EU last May. Although it received little attention, it provides a fascinating insight into the concerns of Irish voters, and the differences in their concerns compared to other countries' electorates.

As is the case across the continent, unemployment was the number one issue for Irish voters last May, with 43pc of people saying it was a major concern. That is despite the fact that more than 90pc of the labour force is working (the flip side of an unemployment rate of just under 10pc).

Although there is no doubt that unemployment and the fear of being unemployed affects a lot more people than those actually out of work, it is equally clear that many people are concerned about joblessness because of its wider effects on society.

Further evidence to support the view that voters are as concerned, if not more concerned, with the economic issues beyond their own personal financial situations is the number citing taxation as their top concern. Just under one in eight people said taxes were a big issue, and, as the graph illustrates, it was well down the list of the issues most salient to voters.

So what does all this mean for the next election and how will last week's budget splurge play out with voters?

Auguring badly for the Government is housing. One in four Irish voters believes it to be a major issue, according to last May's Europe-wide poll. Across the continent, just 6pc of people do, illustrating the much higher salience of the issue here, suggesting - yet again - that narrow self-interest is a very imperfect guide to voting intentions (nowhere close to one in four people is affected by homelessness and unaffordable rents).

This is bad news for the Government because housing is primarily about making supply match demand. But because housing supply is inherently slow changing - owing to the time taken to fund, plan and build homes - nothing that is done now will have any significant impact during the current electoral cycle.

As the Government will have considerable difficulty convincing voters that it has made a positive impact on the housing problem during its tenure, it will have to focus on convincing them that it will be more impactful in a second term. That will not be easy, owing to the strong and understandable tendency of voters to predict future performance on past performance.

Auguring better for the Government is how the increase spending was divvied out. Research suggests financial rewards from governments are most effective electorally if they are significant and felt in the short term. Increases in Christmas welfare payments which were contained in the Budget are likely to fall into this category. So are hikes to public sector pay - the spending increase which accounts for a larger share of the total than any other. They will be substantial for many workers and will take effect in January.

That the Government has resorted to a giveaway budget smacks of desperation. Almost every opinion poll since the economy started recovering three years ago shows that voters are not crediting the Government. With so little time left before the election, the coalition parties have decided to go for broke. It is a gamble that is far from assured to deliver them re-election.


And so what of Budget 2016 and the Government's spat with the Fiscal Advisory Council? Despite the coalition partners saying again and again since last spring that they would limit the injection of stimulus into the economy next year to €1.5bn, a sudden change of course took place last weekend. Not only did the Government increase the amount it intends to spend in 2016, it announced that spending this year would be very significantly above the amounts it had previously committed to.

The Coalition muddied the waters on just what it was doing, and was helped in doing so by the very complicated way governments do their sums. It was able to further muddy the waters after the head of the independent watchdog, Prof John McHale, misspoke in a radio interview on the morning after the Budget on an arcane and highly technical point.

McHale's main issue was that the Government had suddenly changed its plans, backtracking on its commitment to keep spending growth within the limits set out by its own budgetary rules, but his error allowed the Government to sow doubts about his credibility. Matters were made worse by the manner in which McHale sought to clarify, which was, at least initially, weak and confusing, serving only to further undermine his own position and that of the council.

The Government's pulling a fast one is bad economics. Of that there is no doubt. It could end up being bad politics if the more powerful budget watchdog - the European Commission - finds next month that budgetary rules were broken. If it is forced to change the budget at Brussels' behest, the Coalition's claims to competence in economic management will be badly dented.

Twitter @danobrien20

Sunday Independent

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