The State’s finances are continuing to deteriorate at an alarming rate according to the latest Exchequer figures released today. With Government spending running at 21 per cent ahead of last year’s levels and tax revenue down, substantial borrowing now looks inevitable.
The Exchequer recorded a deficit of € 112.7m for the first four months of the year, compared with a €1,178 million surplus at the same stage last year, according to figures released today by the Department of Finance.
The figures look even bleaker when stripping out the once-off payments of €250 million from the Central Bank from the issue of coin and a €650 million transfer from the Social Insurance Fund announced in last December’s budget.
The Exchequer returns to the end of April show voted expenditure, which accounts for the Government’s day-to-day spending, increased by €1.5 billion, or 21 per cent, well ahead of the Government’s own target of 15 per cent for the year.
Meanwhile income tax revenue for the first four months of the year at €2.7 billion is 11 per cent lower than for the same period last year.
Mr Austin Hughes, chief economist at IIB bank described the figures as "very disappointing." Mr Hughes said the soaring rate of expenditure was of particular concern and will force the Government to borrow up to $750 million to balance its budget.
Mr Hughes warned that if spending is not reined in quickly, there could be "very dark clouds ahead."
Though some tax heads such as excise tax and VAT showed some improvement, up 8 and 9 per cent respectively, the gaping hole in the income tax revenue shows no sign of closing.
Mr Hughes said that the increase in indirect taxation demonstrates the continued buoyancy of consumer spending but the disappointing income tax figure points to the still sluggish employment market.
The budget day estimate of a 3 per cent increase in income tax revenue for 2002 now looks increasingly even if the economy picks up sharply by the end of the year.