Public finances remain in a perilous position
Granted this year’s borrowing figure includes just over €3bn in non-voted capital expenditure payments to Anglo Irish Bank and Irish Nationwide Building Society. This relates to the first 10% payments of the original principal sum of the promissory notes committed to those institutions in 2010, or at least that is what the Department of Finance told us at the end of March. It could be argued this €3bn should be factored out when analysing what is really going on in the economy, based on exchequer receipts and expenditure. The reality is that this figure cannot be factored out because it does represent Government borrowing; it will be added to the stock of outstanding national debt and will attract interest payments.
An analysis of the tax revenue figures for the first four months shows it running €108 million ahead of what the Department of Finance expected and 6.7% ahead of the same period last year. The latter growth rate exaggerates the true situation as it includes receipts from the Universal Social Charge (USC), which replaces the previous health and income levies. The health levy was previously regarded as a departmental receipt rather than tax revenue, and its inclusion in the USC exaggerates the growth in total tax revenues. This is all very technical and perhaps a bit confusing, but the underlying picture shows VAT receipts are very weak, primarily reflecting the weakness of consumer spending; excise duties are reasonably strong reflecting continued growth in car sales; and stamp duties and capital gains tax receipts are very weak.
