The Exchequer is expected to be in the red by the end of the year with tax revenue euro1.3 billion short of the Government’s forecast, the latest Exchequer returns from the Department of Finance show today.
The Minister for Finance has been forced to concede that he expects to borrow euro750 million to balance the books. Today’s figures are worse than expected and confound the Minister’s recent forecasts that the exchequer would show a modest surplus this year.
The Exchequer figures which give a snapshot of the Government’s finances at the end of September reveal that the income tax take is 10.7 per cent behind projections and corporation tax revenue at 8.7 per cent is also lagging behind forecasts of 29.5 per cent increase.
Government spending was running at 20.3 per cent at the end of the third quarter but Department officials maintained their view that spending by the year-end will meet the revised spending target of 14.3 per cent for the year. To meet this target spending must be capped at 3 per cent for the last quarter which seems extremely demanding given the recent upward trend.
The controversial special savings scheme will cost euro425 million this year - euro170 million more than forecast - and euro500 million a year from 2003.
A leading economist said tonight that the final deficit figure may be even worse than the Government’s estimate. Mr Austin Hughes of IIB Bank said the deficit may be as much as euro1 billion as a number of payments such as the first tranche of benchmarking payments have to be included though they may not be paid this year.
Mr Hughes described the revised tax revenue estimates as "staggering." In June it was suggested that the shortfall could be around euro500 million, today the Department of Finance revised the shortfall to euro1.3 billion.
Two departments, Education and Environment, alerted the Department of Finance in May that spending was running ahead of the monthly projections imposed on each department earlier this year. Most of this additional expenditure was due to cost overruns in drug schemes and the National Development Plan.
Discussions with unions regarding the implementation of benchmarking are ongoing, Department officials said. The talks are unlikely to be completed in time for workers to receive the 25 per cent of the benchmarking body’s recommendations by the end of the year.