The high cost of the promises made by major parties to woo the electorate

Amid the strong likelihood of the next government being formed by a coalition led by the Move Forward Party, the biggest gainer in the May 14 general election with 152 seats, it is worth looking at the big promises made by the main parties to the electorate and the fiscal burden they would entail for the next four years.

Fiscal constraints and likely resistance from bureaucrats and big businesses to the proposed schemes could make it difficult for parties to live up to their promises.

The schemes promised by Move Forward would require spending in excess of a trillion baht. The party has promised to offer each elderly citizen 3,000 baht per month, at an annual cost of 500 billion baht. In addition, it has promised to give local governments subsidies of 200 billion baht, besides a welfare fund of 98.5 billion baht to support every generation, altogether costing 1.3 trillion baht.

Move Forward’s main ally in the coalition — Pheu Thai Party, which has 141 seats — has made promises that would require 1.8 trillion baht in spending, the second-biggest spending plan among the rival parties. It has promised an economic stimulus via a digital wallet scheme, offering everyone aged 16 years and above 10,000 baht, which would cost about 560 billion baht. The party has also proposed water resource management at a cost of 500 billion baht and a pension fund for the elderly costing 300 billion baht.

The biggest spender

According to the Thailand Development Research Institute (TDRI), which analyzed the policy platforms submitted to the Election Commission (EC) by political parties, Bhumjaithai Party made the most expensive promises, which would require spending of 1.9 trillion. Bhumjaithai, which is a part of the outgoing coalition government, has not been included in the eight-party coalition put together by Move Forward.

Bhumjaithai’s big-ticket items include development of a Southern Economic Corridor, which would require infrastructure investment of 1.7 trillion baht. The party has pledged to allocate up to 30 percent of total personal income tax collections to the provinces, which would cost the exchequer about 101.3 billion baht. An insurance fund for the elderly would cost 37.1 billion baht, handing out 100,000 baht on the death of a person and allowing the elderly to borrow 20,000 baht.

According to the TDRI, Pheu Thai is overestimating the country’s economic growth in framing its policies. Its digital wallet scheme has come under heated debate. The party has tried to clarify that the funding will come from tax collection, which is expected to increase by 260 billion baht. High economic growth will boost tax revenue by 100 billion baht, budgetary management by 110 billion and from the management of overlapping welfare schemes that cost 90 billion baht.

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Banking on tax collections

The party has not dwelt on the risk of missing the tax revenue target. Moreover, it promises to lower gasoline, electricity and cooking gas prices, which would need a large amount of money that tax revenue alone cannot help meet.

The Move Forward Party’s pension plan is estimated to cost 500 billion annually, up from the current 420 billion. It will have to find ways to increase tax revenue by 650 billion baht.

In order to allocate 200 billion baht to local governments, it aims to cut the budget of many ministries. It has an ambitious plan of reforming the military, which would save about 50 billion baht a year.

The party has not taken into account the risk of tax collections being below expectations, or its proposed spending cuts encountering staunch resistance from the military and other ministries at the receiving end of the austerity measures.

“The party could face fierce resistance from bureaucrats,” Kirida Bhaopichitr, director of TDRI’s Economic Intelligence Service, warned.

Under a trillion baht

The Palang Pracharath Party’s promises fall slightly short of the trillion-baht mark, with spending plans of 996.3 billion baht. The leader of the outgoing coalition government has pledged between 3,000-5,000 baht per month to senior citizens, which would cost 495.7 billion. The party has promised to support mothers and newborn children at a cost of 174.2 billion baht. It also promised to more than double monthly pay for state-welfare cardholders to 700 baht from 300 baht at present, and life insurance totalling 128.4 billion baht.

The Democrat Party’s campaign pledges would require annual spending of 685.4 billion baht on its key projects over the next four years. It has vowed to provide support to small and medium-sized enterprises and startups worth 300 billion baht. It promises to arrange a revolving fund of 2 million for villages with a total cost of 160 billion baht, and 30,000 baht in cash to farming households, totalling 97 billion baht.

In comparison with these parties, the United Nation Thai Party of outgoing Prime Minister Prayut Chan-o-cha makes relatively frugal promises, with an estimated cost of around 250 billion baht. It has promised state welfare cardholders a 1,000 baht per month allowance, with a total price tag of 71 billion baht. The half co-payment scheme to boost household spending will cost 40 billion and a 1,000 baht monthly pension scheme for the elderly will also cost 40 billion baht.

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Danger of escalating costs

The rival parties also have policies about which they have not informed the EC, so they would actually be spending more than the above estimates if most of them were to be implemented.

Bhumjaithai Party has made other pledges about which the party does not have details of estimated funding requirements, or has not informed the EC, says the TDRI. The party, for example, has promised to give loans of up to 50,000 baht, which is expected to be implemented by state-owned banks, known as specialized financial institutions, and the estimated annual cost is 700 billion baht. Another scheme is a debt moratorium for three years, with each debtor to receive relief from debt or interest repayment for not more than 1 million baht. This debt suspension is estimated to cost about 900 billion baht in three years, says the TDRI.

Palang Pracharath’s big ticket item is a pension to support the elderly, which is expected to cost about 500 billion annually, but the potential cost could be far higher as the party has promised to give 4,000 baht a month to people aged over 70 years.

The party has justified the schemes, telling the EC that it would improve tax collection, but it has offered no details. For energy subsidy, the party promises to suspend fuel taxes (excise tax, local tax on oil, levies to support oil fuel fund and energy conservation promotion fund) for one year, which could result in tax revenue loss of 140 billion baht, according to the TDRI.

The Democrat Party’s subsidy to farmers is expected to cost 200 billion baht a year, but should its key projects, such as income guarantee and production enhancement support be implemented, the cost may be much higher and it would depend on the market price of farm products, according to the TDRI.

To finance these big-ticket items, the party plans to cut spending on other items by 100 billion baht a year and collect additional tax of 32 billion baht from high-income groups. But the party has failed to clarify which tax would be hiked, as currently the government collects a very small amount from land and inheritance taxes.

The party plans to use off-budget revenue for its startup-SME fund and revolving village fund at a total cost of 460 billion. It is unclear where the money will come from.

The United Thai Nation Party may also be guilty of underestimating the cost of the welfare card project, as it has promised to give each cardholder 1,000 baht a month and is estimating the cost at 71 billion. But taking into account 14.6 million card holders, the cost estimate should be 175 billion, according to TDRI.

Paying a pension of 1,000 baht per month to senior citizens requires about 40 billion baht, but taking into account 6.4 million senior citizens, the cost would be 77 billion baht, according to the TDRI.

Fiscal risks

Other critics and the TDRI are worried about fiscal risks stemming from populist policies.

Should they collect more tax and turn to borrowings, they will find constraints as the current debt at 61 percent of gross domestic product is not at a comfortable level. “Each year we have about 3 trillion baht allocation in the annual budget, but 80 percent goes towards current spending [salary of state officials, maintenance etc] while we have only 700-800 billion baht left for capital spending,” said Kirida.

Meanwhile, the private sector has voiced concerns over a proposed sharp rise in the minimum wage promised by the Pheu Thai Party.

By Thai PBS World’s Business Desk


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