FURTHER TOUGH decisions will be necessary in the coming years to deal with the public finances, Taoiseach Brian Cowen warned yesterday as official figures showed that tax revenues continued to decline last month.
Questioned in the Dáil by Fine Gael leader Enda Kenny about the European Commission's criticism of the Government's borrowing plans for the next two years, Mr Cowen said the commission's figures were made on a "no policy change" basis.
"That forecast does not take into account the commitment to restore the current Budget to balance which was included in our budgetary arithmetic," he said.
Fine Gael deputy leader and finance spokesman Richard Bruton said the Taoiseach's statement in the Dáil amounted to an admission that a package of spending cuts and tax increases of €5 billion would be needed in next year's budget.
"This revelation makes it even more extraordinary that the Government delivered or signed up to public sector pay increases in the past six months that will cost the taxpayer €2 billion, in the full knowledge that massive spending cuts or tax increases are going to have to be made," said Mr Bruton.
The public finances deteriorated further in October, with the exchequer deficit sliding to €11 billion, according to the latest figures from the Department of Finance.
Tax revenues for the first 10 months of 2008 are almost 12 per cent behind projections made at the start of the year. The Government has received total tax receipts of €31.4 billion compared to the €35.7 billion that it had been expecting.
VAT is the tax running the most behind target, coming in more than €1.6 billion short of start-of-year expectation as a result of the collapse of the housing market and a slowdown in consumer spending.
But it was two other property-related taxes, stamp duty and capital gains tax, that were the hardest hit in October. Stamp duty is €858 million behind target, with the sum collected in 2008 almost half that collected in the same period in 2007. Capital gains tax is trailing by €596 million for the year. Corporation tax is also weak, at €558 million lower than expected. Income tax held up better than expected in October, but the figures this month will be even more critical as a significant proportion of overall tax is paid in November.
Mr Bruton said the figures confirmed a further deterioration in public finances and cast even more doubt over the credibility of the Government's economic competence.
"The Cowen-Lenihan economic strategy is creating the worst deterioration in the public finances in the history of the State. It is alarming to see a Government which is making it up as it goes along," he said.
Labour's finance spokeswoman Joan Burton said: "Bizarrely, in the face of this crisis, the Minister for Finance has now taken to blaming the European Central Bank for Ireland's construction boom. It seems the Government will say anything, rather than accept any blame for the mess they have created."
"First they denied there was any problem. Then they blamed the international downturn. Now it is the fault of the ECB. The reason Ireland is the first country in Europe to go into recession is because there was a speculative boom in house prices and housebuilding and Government refused to do anything," she added.