Exchequer borrowings could be cut back to below €1 billion writes Cliff Taylor.
As if the underlying figures were not strong enough, the Minister for Finance looks set to get a significant boost from the Revenue's voluntary disclosure scheme for those with undeclared offshore funds. More than €150 million had been paid over by the end of May and, given the experience of previous schemes, even more again is expected to be paid in by the June 10th deadline.
Precise estimation is impossible, but sources in the tax industry say the tally so far is likely at least to double by the deadline - with the possibility of an even more substantial last-minute rush. It is, of course, a once-off boost to Mr McCreevy's finances. Together with the strong underlying revenue growth, however, it means Exchequer borrowing for the year looks set to be only a fraction of the €2.8 billion forecast on Budget day.
Dr Dan McLaughlin, chief economist at Bank of Ireland Global Markets, said that even taking a conservative view, tax revenue could come in as much as €2 billion ahead of Budget target, which would reduce borrowing to well below €1 billion. Mr Colin Hunt, chief economist at Goodbody, said the Exchequer finances could move back into surplus over the next couple of years.
Looking at the other main borrowing measure - the General Government Deficit (GGD) favoured by the EU - Mr McCreevy looks certain to be back in surplus this year. The Budget forecast for this borrowing measure was a deficit of €1.6 billion; the GGD excludes the money paid by the Exchequer into the national pension fund and is thus lower than the Exchequer borrowing figure.
The most encouraging aspect of the figures is the widespread buoyancy in tax revenue, which indicates a recovery in economic growth and improving consumer confidence. Income tax is running an extraordinary 22 per cent ahead of 2003; even when the receipts from the tax disclosure scheme are excluded, the increase is 17 per cent.
At the start of the year, the Department of Finance estimated that €12.62 billion in taxes would be collected in the first five months. However, the total is more than €630 million higher at €13.251 billion. Taxes were higher in most categories and the strong housing market continues to contribute. Capital gains tax revenues of 463 million were more than double what was expected for the first five months - presumably partly due to the sale of investment properties - while stamp duty of €719 million is more than €60 million ahead of target.
While these capital taxes have been strong since the start of the year - and appear to reflect in part a greater-than-expected take from changed payment dates for capital gains tax - the more encouraging aspect of the figures is the strength in the bigger tax headings. Even allowing for the once-off Revenue take, the income tax figures are ahead of schedule and VAT revenues have also moved ahead of target.
On the spending side, Mr McCreevy seems determined to avoid any charge of a pre-election splurge. Spending is running 4.6 per cent ahead of last year, compared to a Budget target of just over 7 per cent and capital spending is actually running below last year's level. The Department says that timing factors are involved in depressing spending growth.
However, even allowing for this, spending is being kept on a very tight rein. The net result of this revenue strength and spending restraint is, of course, a rapidly improving Exchequer position as the Government heads into the second half of the current Dáil. In terms of the electoral cycle, it appears to be coming good again for Mr McCreevy.
