See Search Box
lower down this column for searches of Finfacts news pages. Where there may be
the odd special character missing from an older page, it's a problem that
developed when Interactive Tools upgraded to a new content management system.
Welcome
Finfacts is Ireland's leading business information site and
you are in its business news section.
Brian Lenihan, Irish Minister for Finance, chatting with Christine Lagarde, French Minister for Economic Affairs, before the Eurogroup meeting in Brussels, Monday, Feb 15, 2010.
The Irish Exchequer deficit was €8.89bn at end-June 2010
compared to €14.71bn in the corresponding period in 2009. This is generally in
line with targets set in the December 2009 Budget.
The year-on-year difference in the
Exchequer deficit is largely attributable to €3bn payments to both the National
Pensions Reserve Fund (NPRF) and to Anglo Irish Bank, which had been made at
this point in 2009. Taxes were just under €1.4bn or 8.7% below the same period
last year while net voted expenditure was some €1.4bn or 6.2% lower.
Tax Revenue: In total, €14.43bn in
tax receipts were collected to the end of June. This was €227m or 1.6% below
target. Small surpluses on VAT, Corporation Tax, CGT (Capital Gains Tax), CAT (Capital Acquisitions Tax) and Customs offset to
some extent the income tax shortfall of just over €300m. The year-on-year rate
of decline has been easing since end-2009, as expected and taxes at end-June are
8.7% below the same period in 2009.
Income tax was down €300m on its target; VAT was
up €50m, compared to this time last year.
New Fine Gael Finance Spokesman,
Michael Noonan, said the drop in income tax receipts "indicates that the jobs crisis is getting
worse."
He
added: "Cutting the public deficit and
saving the banks alone will not solve the jobs crisis. Indeed,
if these data show anything, it is that we will never solve the
fiscal crisis until we help people back to work."
The Department of Finance says that
there are significant targets to meet in the months ahead and the Department of
Finance will continue to monitor the situation, particularly so in relation to
income tax. At this stage, the forecast for tax revenues of €31bn 2010, or a
year on-year decline of 6% remains valid.
Voted Expenditure: Total net voted
expenditure at end-June 2010 was €21.5bn, over €1.4bn or 6.2% below the same
period in 2009. The Revised Estimates Volume projected a decline of 1.9% in
total net voted expenditure in 2010.
Net voted current expenditure, at
€19.65bn was €377m or 1.9% down year-on-year at end-June and was €104m or 0.5% above profile.
Net voted capital expenditure, at
€1.84bn at end-June, was €1.03m or 36% below the corresponding period in 2009.
It was €609m or 24.8% below profile.
The Department says the year-on-year variation in net voted
expenditure is largely due to the expenditure control decisions taken by
Government. The variation against target is mainly due to timing issues and
Departments are expected to adhere to their allocations for 2010.
Commenting on the Exchequer returns to the
end of June, IBEC Senior Economist Fergal O'Brien said: "Businesses are very concerned that Government will not meet its
targets for public capital investment this year. While current expenditure is
running marginally ahead of budget, capital investment is a substantial 25%
behind target. While there may well be timing issues at play here, it is vital
that Government remains committed to its own capital investment targets.
"The tax revenue position has continued to stabilise in recent months, but the
under performance of the important income tax head remains a concern. The
Exchequer numbers again highlight the risk of a jobless recovery and point
towards the urgent need for measures to support domestic demand and employment.
It won't feel like this recession is over until firms have the confidence to
start re-hiring again."
Ulster Bank economists, Simon Barry and Lynsey
Clemenger commented:
Tax revenues behind plan again in June,
as income taxes underperform…
Tax revenues fell behind for the second month running in June. While the €80m
shortfall in the month will in itself have no significant bearing on budget
arithmetic, it is notable that, following the solid performance in April, the
tax revenue position has continued to deteriorate. Of some comfort here is that
the weakness in June was not broad-based across tax categories, with receipts in
almost all tax heads coming in roughly in line with the Department of Finance’s
monthly plan. Rather the shortfall in June was concentrated in income taxes,
with receipts in this important category some €84m behind expectations.
Indeed, looking at the first half of the year,
income taxes are the main source of the €227m cumulative shortfall in total tax
receipts. When they are excluded, tax revenue is actually running some €76m
ahead of plan, driven by a better than expected performance in the VAT and
corporation tax categories. In the case of VAT, the better performance in the
second quarter in particular is almost certainly linked to the improving trend
in consumer spending, as evidenced in the monthly retail sales figures.
Expenditure restraint dominated by €1bn cut in the capital spend vs. ’09
levels…
Turning to expenditure, overall net voted spending by government departments was
€141m lower than expected in June. Indeed, for the first half of the year as a
whole expenditure is running some €500m, or 2.3%, behind plan and €1.4 billion,
or 6.2%, lower than year-earlier levels.
However, the aggregate picture masks some pronounced divergence when one looks
at the relative trends in the current and capital spend. In particular, the
deviation from plan in June was dominated by a major shortfall of €219m in
capital spending – the fourth consecutive month in which capital spending has
been some distance shy of the Department’s profile which was set out in March.
In total, capital spending is now running €609m below anticipated levels for
this stage of the year. That equates to a shortfall of almost 25% which is the
largest percentage shortfall of the year. As noted last month, the shortfall is
most notable in the Departments of Transport and Environment which together
account for over €400m of the underspend. With total capital spending now
running €1 billion (or 36%) lower than 2009 levels, this is a pattern which will
do little to assuage the concerns of players in the construction sector who have
been worried about the impact of retrenchment in the capital programme. The
Minister continues to ascribe the deviation from profile to ‘timing issues’ but
that explanation is beginning to come under pressure given the large, and
growing, deviation of actual spending levels from plan.
Meanwhile, day-to-day expenditure was higher than expected for the second month
running in June. This reverses the pattern of lower than anticipated spending in
March/April and hints at a somewhat lower level of spending restraint on the
current side lately relative to earlier in the year. While total current
spending is running 1.9% lower than levels seen in the first half of 2009, it is
running a touch (0.5%) higher than plan.
Overall, as we pass the mid-way point of the
year, the government’s budgetary targets are broadly on track. Taxes outside of
income tax are running slightly ahead of target, though we share the Minister’s
concern on the poor income tax returns, for two reasons. First, because of the
risk that it represents to the revenue side of the public finance outlook, and
second because of the signal that is sending about what is still a very weak
jobs market. Meanwhile, spending continues to run well below year-ago levels,
though this is dominated by very sharp declines on the capital side; we would
prefer to see current spending play a greater role here.
