THE GAP between tax revenues and Government spending soared in the first three months of the year, according to figures released by the Department of Finance yesterday. The quarterly deficit was the second largest on record, at €7.1 billion.
Despite the increase in the deficit, it was not enough to breach the €7.8 billion ceiling set down last November under the terms of the EU-IMF bailout.
Officials from the EU and IMF arrived in Dublin yesterday and will today begin their assessment of whether Ireland has adhered to the terms of the package set out last November.
They are expected to meet Government Ministers and officials, mainly from the Department of Finance, in the course of their visit. The teams are scheduled to stay until Friday week.
In these talks, the Government will seek to change some of the terms of the bailout.
Minister for Enterprise, Jobs and Innovation Richard Bruton said yesterday: “The IMF have made it clear from the very start that they will support changes in the package of measures.
“We’re looking to rejig the package in order to have a more pro-employment approach and that’s at the heart of the strategy that has been developed by Government.”
Responding to the publication of the tax and spending figures, Minister for Finance Michael Noonan said: “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.”
The increase in the deficit was largely the result of payments to cover the losses made by Anglo Irish Bank and Irish Nationwide Building Society.
The cash cost in the first three months of the year was €3.1 billion.
In the first quarter of 2011, the spending of most Government departments fell on a year earlier.
However, because the largest spending departments all recorded sizeable increases, total expenditure rose.
Spending at the Department of Health and Children increased by almost 10 per cent, to reach €3.5 billion.
At the Department of Social and Family Affairs, expenditure increased by almost 20 per cent, to €3.1 billion. The Department of Education and Science registered an increase of almost 11 percent, to €2.1 billion.
Partially offsetting the increases in spending in the first three months of the year were higher tax revenues. Compared to the first three months of 2010, the total tax take was 3.7 per cent higher.
Most of the increase was accounted for by stronger income tax returns, which include revenues from the universal social charge.
With higher tax rates taking effect at the beginning of the year, total income tax revenue in the first three months stood at €2.9 billion, up almost 10 per cent.
A number of other taxes fell over the same period. Value added tax declined by more than €100 million on the first quarter of 2011, to stand at €3.1 billion.
Responding to yesterday’s exchequer figures, Sinn Féin finance spokesman Pearse Doherty said they were another strong reminder as to why the Government needed to stop “pumping billions of taxpayers’ money into zombie banks.
“Sinn Féin indicated during the debate on Budget 2011 that further austerity measures would depress the domestic economy. Today’s figures show that this is exactly what has come to pass.”
By contrast, deputy leader of Fianna Fáil and former finance minister Brian Lenihan said that the figures released yesterday showed that the targets set by the Fianna Fáil-Green Party coalition were being reached.
“The figures show that the previous government’s budget targets are being met,” said Mr Lenihan.
“It is essential that, whatever decisions are taken by the new Government, those targets continue to be met,” he added.
