“Nova”, the M5S’s programme, is good old-fashioned deficit spending

Now that Istat has confirmed a 2025 deficit of 3.1 per cent, leaving Italy subject to infringement proceedings, it makes sense to look at the potential budgetary policy of those presenting themselves as an alternative to the Meloni government. The M5S has presented ‘Nova’, a 20-point policy document to be brought to the table of the progressive coalition. The eleven pages reveal a familiar approach to the Five Star Movement’s economic policy, in which the benefits are announced immediately whilst the costs are not mentioned.

The plan contains 26 items relating to increased expenditure and reduced annual current revenue, in addition to five major capital outlays. The result is a burden on public finances of 120 billion euros per year, with the uncertainty of a budget built on measures that often lack specified amounts, target audiences and implementation timelines. For this reason, our estimate remains on the low side. One example suffices: the National Health Service fund, which is proposed to be increased ‘to close the gap with the OECD average’. This single line item entails increased expenditure of around 20 billion per year.

As for the funding sources, however, Nova is entirely vague. The document lists eleven sources of funding, but the only estimate relates to the reduced expenditure on the Strait Bridge (13.5 billion). The other items remain unclear and vague (“common [European, ed.] taxation on very large fortunes and multinationals”) and for this reason it is not easy to make an estimate. Based on reasonable assumptions, we have ultimately arrived at a figure of 7 billion in recurring annual funding, to which 17 billion in one-off resources must be added. It should be noted, therefore, that whilst the increased expenditure is structural, part of the funding is one-off, whilst the recurring portion of the funding covers only 10 per cent of the increased expenditure. In other words, almost all of the 120 billion in increased expenditure is deficit-funded, which is hardly surprising given the Five Star Movement’s recent track record (Superbonus).

But the problem is not just about public finances; it concerns the whole underlying philosophy. Take, for example, the ‘generational handover’ in point 3, the one on pensions. According to the proposal, it encourages ‘the voluntary reduction of working hours by workers approaching retirement, coinciding with the permanent recruitment of a young person, with the state compensating for the loss in social security contributions’. This proposal encapsulates the entire Five Star Movement philosophy: the notion of work as a fixed quantity to be divided up (to employ a young person, an older worker must work fewer hours) and the idea that the state should take responsibility for compensating for everything by passing the cost on to future generations.

However, a moment’s reflection reveals that the measure makes little sense. A company that would have hired anyway would not create any additional jobs, while one with insufficient demand might opt out of the scheme, as reducing an employee’s working hours would hardly be enough to make hiring new staff viable. Looking further, the distribution details of the rule are even more convoluted. The state, in fact, would cover the lost social security contributions, whilst the text leaves the reduction in salary unaccounted for (which would instead go to the new young worker). In other words: the older worker would obviously receive a reduced salary and would therefore need to be able to afford it, meaning the measure would primarily benefit high-income or high-net-worth workers. Those on low wages would probably be forced to continue working the same hours, whilst contributing through their taxes to the benefit of their more fortunate colleagues. In reality, the measure, which is presented as ‘pro-youth’, would amount to a transfer from low-income (and young) workers to their older (and high-income) colleagues: the exact opposite of what the M5S intends to achieve.

Nova’s plan harks back to the era of major deficit-financed spending programmes, compounded by the fact that many of the promises are of a permanent nature (five years of Nova would cost 600 billion, more than the combined expenditure on building grants and the PNRR). Among the proposals, of course, there are laudable objectives that deserve priority and appropriate resources. The populist streak, however, is evident in the ease with which visible benefits are piled up whilst the sacrifices needed to fund them remain undefined, with catchy slogans used to gloss over the inevitable future bill. The risk is that, after the elections, we will find ourselves with budgetary constraints still in place and results that run counter to the promises made.

For our part, we hope that the row within the coalition will be resolved before the inevitable giveaway of free cookware sets, because that too would end up being paid for by taxpayers.