A few days before the parliamentary elections on April 6, 2014, Transparency International Hungary (TI) and the Institute for Budgetary Responsibility (KFIB) reviewed the programme of all parties that are currently represented in parliament, and stand a chance of winning mandates in the new elections. KFIB examined the effect of party programmes on the budget, while TI took under scrutiny the anti-corruption promises of parties. The governing parties failed to publish their election programme before March 27, for which reason it was impossible for us to examine the anti-corruption proposals of Fidesz-KDNP.

Tax cuts and expenditure rises at the same time

From the programme of the parties in the Kormányváltás alliance (’change of government’ in Hungarian), LMP and Jobbik it is apparent that the opposition parties are promising tax cuts and expenditure rises at the same time, which means they would put a burden on both the income and the expenditure side of the budget. DK and Együtt-PM would increase the budget deficit to a great extent, while LMP, MSZP and Jobbik to an outstandingly great extent. If MSZP’s programme should be implemented, the budget deficit would grow to 8.4% of GDP by 2015, while Jobbik’s programme would increase the deficit to 12%. (Based on recent trends, KFIB is predicting a GDP-proportionate deficit of 3.5% for 2014, and 3.1% for 2015.) An explosion of the budget deficit is as good as guaranteed based on the programmes of opposition parties.

If the programme of DK and Együtt-PM is realised, the rate of GDP-proportionate debt would be above the levels of the baseline scenario in 2017 by 3 to 4 percentage points, while with the scenario of MSZP, Jobbik and LMP by 7 to 8 percentage points. (The baseline scenario showed how the macroeconomic and budget indices would develop between 2014 and 2017, without any legislative changes.)

Increasing debts without boosting economy

We expect that a decisive part of the budgetary loosening would already be implemented in 2015. Despite that, in reality the growth rate of GDP would not exceed 2.5% in 2015 even with the most optimistic scenario. The budgetary loosening would namely be implemented with a structure, where the state’s increasingly active role would reduce rather than increase the private sector’s involvement. The centralisation of the economy and the involvement of the state would reach new heights. If the programme of DK, MSZP and Együtt-PM (that is the Kormányváltás alliance) gets implemented, the economic output of the private sector in the years 2014 through 2017 would grow only slightly faster than in the baseline scenario, while with the programme of Jobbik and LMP, significantly slower than the baseline scenario. If therefore the programmes of the opposition are realised, we can essentially rule out that the growth of the private sector could offset the expected growth of the public debt between 2015 and 2017. In three years’ time, the programme of the socialists would raise public debt to 89% in proportion to GDP. As we can see, the overall picture is one where the opposition parties would be willing tolerate a 2% rise in debt rates for every single percent of GDP-growth, even though at least looking at their communication, all of them expect the drop in the debt rates to be triggered by a recovery of growth.

No transparency of state budget

LMP does not deal with the issue of budgetary transparency at all. DK and MSZP are only planning on reinstating the Budgetary Committee, while Jobbik and MSZP have declared the goal of a transparent and realistic/professional budgetary planning. Együtt-PM is the only party to promise measures for improving the efficiency of the budgetary system (‘programme-based budget’) and to strengthen fiscal discipline (the right of the Budgetary Committee to reject any bill).

None of the parties have anything planned for the eventuality that the measures promised in their programme should imperil budgetary balance. But apparently, as our analysis has pointed out, if the promises of the parties are realised, ‘unexpected’ corrective and austerity measures will be certainly necessary. “If the parties believe that this is the right direction, or are of the opinion that Hungarian voters would prefer this, then everything is just as it was in the past 12 years as regards budgetary responsibility”, said Mr. Balázs Romhányi, director of KFIB at the event in Budapest where the analysis of party promises was presented.

Macroeconomic basics in the light of party programmes 

“Election programmes  indicate, that parties prefer to stay solely in line with what they believe to be the wish of voters instead of outlining reasonable plans of governance” said Mr. Péter Ákos Bod, professor of economics at Corvinus University, Budapest, and patron of honour of the ‘what do we choose’ project. Mr. Bod added, that voters seem to be welcoming unsustainable political promises, as people want to hear that the state is going to take care of them. Party programmes shed however more light to fair and just use of public money, a “step forward”, called Professor Bod. “Economic research findings show that voters who behave rationally do not pay much attention to party programmes” claimed Professor Ákos Szalai, co-patron of the project, who called this “an advantage, as long as parties’ programmes are so unreliable.”

Examination of anti-corruption promises:  Where Hungary stands now…

We have also assessed the anti-corruption promises of parties. Our related analysis can be found on themitvalasztunk.hu (Hungarian for ’what to vote for’) website. Previously, in January 2014, TI published a comprehensive study on the transparency of Hungary’s system of public policy institutions, where it examined whether the current public government system is able to resist corruption. Ever since the fall of communism, Hungary’s governments have delivered an abysmal anti-corruption performance. Already by the tenure of the socialist-free democrat governments (2002 to 2010), corruption had become institutionalised, which the current government topped by disrupting the system of checks and balances designed to limit its power, and subordinated legislative work to its everyday power interests. “All this had the result that the transparency of public policies and the system of public institutions is in a lamentable state today in Hungary”, stressed Mr. József Péter Martin, managing director of TI.

Democracy package with different emphases

The review of party programmes has clearly shown that the Kormányváltás alliance (e.g. DK, MSZP, and Együtt-PM), and also LMP would restore the system of checks and balances, would for example reinstate the rights of the Constitutional Court, and would again entrust a parliamentary ombudsman with protecting the freedom of information. They would also put an end to retroactive and tailor made legislation disproportionately favouring  persons or companies. Kormányváltás would extend the competence of the Budgetary Committee compared to today’s situation as a sign of their commitment to the constitutionality of public finances. The most radical ideas – the complete restoration of pre-2010 conditions – were formulated by DK, while LMP is promising the partial correction of the political edifice. If the democratic parties of the opposition have their will, the scope of information to be made public will be wider, and it will be more difficult to withhold information citing state secrets or business secrets. They would make any and all state contracts public.

Campaign financing and public tendering – as TI recommends

The government-changers of Kormányváltás would rewrite regulations on campaign financing in accordance with the recommendations of TI. LMP would promptly restore order in the market of public billboards. They would limit the advertising rights of state companies, and would require the state to purchase advertising surfaces only by way of public procurement.

The government-changing alliance would also enter into law an old demand of TI to create an up-to-date, searchable and accessible online database for public procurement, which would enable the monitoring of public spending. LMP would put an end to priority investments awarded without a bidding process in fast track procedures. Kormányváltás would protect persons reporting corruption and exposing wrongdoing by reintroducing whistle-blowing protection legislation adopted in 2009, and MSZP would top that with a new and comprehensive anti-corruption strategy. LMP would introduce stricter regulations for investigations of cases involving the political elite, and would require the government to issue a public report every year in the form of a ’white book’.

As part of the fight against corruption, Együtt-PM and MSZP would investigate the awarding process of concessions for the retail trade of tobacco products, and the lease of state-owned agricultural land. In addition, MSZP would also have a word to say about the nationalisation of cooperative saving banks. But the true champion of accountability is Jobbik. The party that loses hardly any word on corruption, would call the economic and political elite, the land barons and senior police officers to account, would reintroduce a gendarmerie, and would ban ‘offshoring’.

Well-sounding promises, questionable credibility

It throws the commitment of Kormányváltás to fight corruption into doubt that earlier left-wing governments barely realised anything of what they are now promising to do should they come to the government, but indeed, they did not dismantle the system of checks and balances. TI is of the opinion that the left – when they were in power – did not step up for transparent party and campaign financing, and their anti-corruption activities were abysmal. Numerous studies have found, the playing field of public procurement procedures also tilted towards friendly companies during the office term of leftwing governments , but indeed, it was not laid down in legislation at that point. However, the incumbent government also failed to adequately address corruption, which therefore continues to immensely deteriorate Hungary’s competitiveness and calls public trust into question. Current framework of campaign financing, which TI judged cynical and unjust, proves just as unable to prevent corruption in election campaigns as the mechanism in place prior to 2010. No wonder, that TI quit the anti-corruption working group of both the Gyurcsány government, and the incumbent government.

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Pricing methodology

The assessed party programmes contain altogether more than 500 promises. More than half of these could be priced, but in the majority of the cases, additional assumptions were also necessary for that. We calculated the prices of the single promises based on the baseline scenario published by the Institute for Budgetary Responsibility in early February. The baseline scenario showed how the macroeconomic and budget indices would develop between 2014 and 2017, without any legislative changes. We calculated each effect for a 3-year period. We only dealt with promises whose realisation is within the competence of the Hungarian government and Parliament. For example, we did not deal with the renegotiation of public debt, as envisioned by Jobbik, for this requires the co-operation of foreign investors, which goes far beyond the jurisdiction of Hungary. We started by calculating the direct effect of each promise, where we also factored in behavioural effects. Such as for example the fact that different types of tax rises encourage tax payers to work more or less. Yet we did not take into consideration the whitening effect that certain parties assume, or the blackening effects which will most likely manifest as a result of tax rises, albeit to an unpredictable degree.