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Minister for Finance Brian Lenihan TD addresses the Michael Collins commemoration at Béal na mBláth, West Cork, Aug 22, 2010.
The Irish Exchequer deficit at end-August 2010 was €12.1bn,
according to the Department of Finance this afternoon. The Department said this
compares to an Exchequer deficit of €18.7bn in the period to end-August 2009 and
in overall terms, is generally in line with expectations and the Budget Day
targets for 2010 remain valid. Tax revenues are just under €1.9bn or 9% below
the corresponding period in 2009. Net voted expenditure is just under €1.8bn or
6% lower.
The fall in the deficit from 2009 is mainly related to a €3bn
payment to the National Pensions Reserve Fund (NPRF) and a €3.8bn payment to
Anglo Irish Bank which were made in the first eight months of 2009 and neither
of which have been repeated in 2010.
The Department said in total, just over €18.9bn in tax receipts
were collected in the first eight months of the year. This is €141m or 0.7%
below target. At end-July, taxes were €247m or 1.4% below target. 3 of the
"Big 4" tax-heads - - VAT, corporation tax and excise duties - - performed above
expectations in the first eight months of the year. While the fourth - - income
tax - - remains behind target at end-August, but it came in ahead of its
monthly target for both July and August.
While the year-on-year rate of decline in tax
revenues worsened slightly from the 8.2% decline recorded at end-July to 9.0% at
end-August, the Department said a disimprovement had been anticipated in the
monthly target for August. This is due to a large once-off Corporation Tax
payment of €350m that was collected in August 2009 and which negatively impacts
upon the year-on-year comparison.
It added that there are significant targets
to meet in the coming months, particularly in September and November, the
Budget Day forecast for tax revenues of just over €31bn in 2010, or a
year-on-year decline of 6%, remains valid.
At end-August, total net voted expenditure at
some €29bn is just under €1.8bn or 6% below the same period in 2009. The
Department said this year-on-year decline is largely the result of expenditure
control decisions taken by Government.
At end-August, net voted current expenditure
is €205m or 0.8% above target at €26.4bn. It is €441m or 1.6% below the
corresponding period in 2009.
Net voted capital expenditure at end-August,
at €2.6bn, is down some €1.3bn or 34% year-on-year. It is €803m or 24% below
target. The Department said a considerable portion of this shortfall is due to
timing and operational issues and it is anticipated that capital expenditure
will pick up over the remainder of the year.
“While we understand that capital
spending by its nature can suffer from timing difficulties, such a large
shortfall after eight months of the year is a great worry,” said David Croughan, IBEC’s chief economist.
“Given the necessary constraints on current expenditure, we are dependent on
the capital programme to stimulate jobs and growth. Now that Government has
reviewed capital expenditure up to 2016, it is essential that it gets on with
implementing it.”
Commenting on current expenditure, Croughan said government has been reasonably
successful at containing spending at 1.6% below the same period of last year and
just over €200m above planned spending.
Davy economist, Aidan Corcoran, commented:
Tax returns broadly in line with budget
projections; Capital spending falling short
Exchequer revenue on target to meet yearly
projection
Total exchequer tax receipts in the eight
months till August came in at just 0.7% behind the projection from last
December's budget.
This is an improvement on the July figure of
1.4% behind, and suggests that the government's ambitious fiscal
consolidation plans are broadly on track.
Income tax was 4.7% behind target in July,
but caught up somewhat to post a shortfall in the year to August of 3.9%.
VAT, the next most important of the eight major tax headings, improved from
being 0.2% ahead to 0.7% ahead.
Returns consistent with early stage recovery
A number of recent data releases have
suggested a faltering recovery, so the relatively brighter picture from the
exchequer is welcome news.
The disappointing retail sales and labour
market data underscore the fragility of the economic outlook, but today's
tax returns suggest that stabilization in consumption spending and the
labour market has not been disrupted.
Capital spending still lagging
A notable feature of today's exchequer
numbers is the low net voted capital expenditure number. At €2.6bn, this
figure is 24% below target.
While low capital spending could eventually
impact Ireland's long term infrastructure, the main take-away form today's
figures is the positive signal the tax returns send for Ireland's underlying
budget deficit.
