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News : Irish Economy Last Updated: Apr 5, 2011 - 3:46 AM

Irish Exchequer deficit was €7.1bn in first quarter of 2011 - - includes €3.1bn payments to Anglo Irish Bank/ Irish Nationwide
By Finfacts Team
Apr 4, 2011 - 5:01 PM

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The Irish Exchequer deficit was €7.1bn in the first quarter of 2011. This compares to a deficit of €3.9bn in the corresponding period in 2010. The deficit includes €3.1bn in Promissory Note payments to Anglo Irish Bank and Irish Nationwide Building Society in March 2011. Absent this amount the shortfall would have been -€3.9bn.

Budget 2011 target of €34.9bn or 9.9% up year-on-year due to impact of Budget tax raising measures, including USC (universal social charge); quarter 1 2011 tax revenue at €7.5bn; €270m or 3.7% up year-on-year; €136m or 1.8% below target with shortfalls in VAT and income tax offset to some extent by excise duty and corporation tax surpluses.

Year-on-year increase in spending largely due to reclassification of health levy receipts to form part of USC – - has the effect of increasing net voted expenditure.

The interest on the national debt was €791m.

End March Exchequer Returns Presentation

End March Analysis Net Voted Expenditure

End March Analysis Tax Receipts

End March Exchequer Statement

Commenting on the end-March 2011 Exchequer Returns, Minister Michael Noonan said: “The Exchequer deficit in the first quarter of the year, at just under €7.1bn, is broadly in line with my Department’s expectations at this point in the year and means that we have met the target set under the joint EU/IMF programme of financial support.

 Tax receipts in the period to end-March, at €7½bn were some €270m above the same period in 2010 but €136m or 1.8% below expectations. In the overall context, this is not a significant shortfall. However, today’s figures show a mixed performance in the inpidual tax categories. VAT and income tax have shown signs of weakness and given their importance, their performance will need to be closely monitored in the coming months.

On a more encouraging note, corporation tax and excise duties have continued the good performance of last year in the opening months of 2011.

While the weakness in certain taxes is a concern, the overall Exchequer targets set in the Budget remain valid at this point in the year. My Department is currently in the process of updating the macroeconomic and fiscal outlook in preparation for the submission of our Stability Programme Update to the European Commission by the end of this month.”

Commenting on Expenditure to date in 2011 Minister Brendan Howlin stated; “At €10.9bn, overall net voted expenditure is up 1.7% year-on-year. This is largely due to the reclassification of health levy receipts to form part of the Universal Social Charge, which has the effect of increasing net voted expenditure. Overall net voted expenditure is being managed within the limits set out in the Revised Estimates and was €255m below profile in the first quarter of the year." 

The Ministers concluded that: “The Government’s decisions last week to restructure the Irish banks and to improve credit availability are necessary elements of economic recovery.  These decisions combined with the implementation of the Programme for Government will put Ireland on the road to economic recovery.  The Government is now moving on to the next phase of our plan, the Jobs Fund, which will create a more attractive environment in Ireland for investment and job creation.

Davy economist, Conall McCoille, commented:

Tax revenues slightly behind expectations

  • Income tax and value added tax receipts were 4.2% and 5.4% weaker respectively in Q1 2011 than the expected budget profile;
  • However, corporation tax receipts were €216m, well ahead of the €139m target. Customs and excise duties were also stronger than expected by €72m;
  • Today's tax receipts indicate that consumer spending and employment are weaker than the budget forecasts, but this has been offset by the stronger export sector;
  • Overall, tax revenue was 1.8% weaker than the Q1 target, a slight improvement compared with the 2.6% shortfall in the first two months of the year.

Expenditure weaker than expected

  • Net voted expenditure was 1.7% higher than in the corresponding period of 2010;
  • However, this increase related to a reclassification regarding the Universal Social Charge;
  • Eliminating the impact of this reclassification, net voted expenditure was 2.3% lower than expected for Q1;
  • The exchequer deficit was €7.1bn in Q1 following the €3.1bn payment of promissory notes already included in last year's general government deficit and debt.

Returns meet target set under EU/IMF programme

  • Overall, today's Exchequer Returns are broadly in line with expectations;
  • The Minister of Finance has indicated that the returns meet the target set under the EU/IMF programme.

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