The Government has come under increased pressure to implement further spending cutbacks to meet its Budget day targets as new figures point to a larger-than-expected slump in tax receipts.
Exchequer figures for the eight months from January to August show a huge reduction in the Exchequer surplus to €0.95 billion compared with €2.95 billion in the same period last year.
If tax receipts continue to be sluggish in the remaining months of the year it will make it more difficult for the Government to realise even a modest surplus.
The figures show that increases in Government spending during the eight-month period slowed to 18.9 per cent, compared to more than 22 per cent in the same period last year. This is still well above the Government's 14.5 per cent target, suggesting that spending will have to be further curbed in the months ahead.
Opposition politicians said that the figures rubbished the Taoiseach's recent comments that there had been no cutbacks in public spending. Fine Gael's finance spokesman, Mr Richard Bruton, said that the Exchequer returns showed that Government spending would have to be cut sharply in the remaining months of this year to stay within budget.
"The sad truth is that in the Budget of 2002 the Government misrepresented the true cost of the commitments which it entered into and misrepresented the resources available to meet those commitments," Mr Bruton said.
The Labour Party's finance spokesman, Mr Brendan Howlin, said that the figures highlighted serious economic problems which were a direct result of the Minister for Finance's gross mismanagement of the economy.
"It is clear that if the Government is to meet its own stated objective of meeting Budget day expenditure targets, then the severity of cutbacks in the final quarter of the year will be even harsher than those announced so far," he said.
The figures also give an indication that measures to rein in Government spending are making some impact. In the eight months to the end of August, Government spending approved by the Dáil rose by 18.9 per cent, compared with a 22 per cent rise in the same period last year.
However, at 18.9 per cent, Government spending is still running strongly ahead of the 14.5 per cent Budget day target set by the Minister for Finance. While spending remains a concern, it was the underlying weakness of tax receipts which surprised some economists, leading them to suggest that the end-of-year tax take will now be substantially less than official forecasts.
Yesterday's figures show that at the end of August tax revenues had increased by just 1.1 per cent against Department of Finance estimates of an 8 per cent growth this year. Income-tax receipts were considerably weaker, coming in 11.2 per cent below the sum yielded in the first eight months of 2001.
Last month the Department of Finance revised its forecasts for tax revenues, suggesting that the final out-turn will be €500 million shy of its Budget day estimate.
IIB's chief economist, Mr Austin Hughes, said that the August Exchequer figures suggest a much larger shortfall - possibly as large as €1 billion - by the end of the year. Bank of Ireland economist Dr Dan McLaughlin said that the figures were disappointing, but he believes that tax receipts will pick up in the months ahead and says that the returns at the end of the year could be in line with the Department of Finance forecasts.
With the economy at full employment, the sluggish income-tax receipts are puzzling some commentators.
One factor which has affected Government revenues from this source has been the Government-backed Special Savings Incentive Account scheme as monies paid to the public who opened these accounts comes out of income-tax receipts When this is factored in, the decline in income tax revenues is 7 per cent. Other taxes, such as excise duties and VAT, have improved suggesting solid growth in consumer spending.