Brian Cowen, the Minister for Finance, expects to borrow €1.1 billion next year, even before the impact of any measures announced on Budget day.
The 2006 Estimates of Receipts and Expenditure - known as the pre-Budget white paper - published yesterday indicates Mr Cowen is expecting only a moderate increase in tax revenues. This will result in an increase in the borrowing requirement from an estimated €850 million this year to €1.1 billion - not including Budget announcements - for next year.
The Minister is expected to announce spending of at least another €2 billion on Budget day, which would indicate a headline borrowing requirement of over €3 billion for next year.
However, the final number is likely to be less as some of the Budget day spending will flow back to the exchequer in the form of income tax. Also the Department's predictions for tax revenue are likely to prove too conservative, if previous years are any guide. This indicates a borrowing requirement of much less than €3 billion for next year.
The revenue estimates for next year assume only modest increases in capital gains taxes and stamp duties, indicating the Department of Finance has taken a cautious view on the property market, which has been the main source of these revenues.
The Department is pencilling in an increase capital gains tax receipts from €1.96 billion to €2.02 billion. Capital acquisition tax receipts are predicted to rise from €250 million to €260 million. Corporation tax receipts, which have not lived up to expectations this year, are expected to grow strongly next year from €5.47 billion to €6 billion.
The Minister will finish next year with a general governmnet balance (GGB) surplus of €1.3 billion, before the impact of Budget day spending. The GGB, which is the measure preferred by the European Commission, includes all Government income and expenditure and not just the central exchequer.
By this measure the outcome for 2005 will be a small surplus of €439 million. This figure includes the full costs of payments due to residents of nursing homes who were overcharged, which is €1 billion. The end-2005 exchequer position is estimated at a deficit of €849 million.
