Borrowing requirements stay same

THE Department of Finance has no plans to revise its borrowing requirements for this year after new figures showed the Government borrowed close to €900 million less than it expected in 2003.

Department officials said there was no certainty that the Exchequer would see the kind of bounce in the public finances it did towards the end of last year when the deficit was €889m short of what had been forecast in Budget 2003.

The deficit was just 0.1% of gross domestic product (GDP).

The Government has forecast a deficit of €2.8 billion for 2004 and Finance Minister Charlie McCreevy said he still expects this.

He said the country will need to borrow €10 billion over the next three years to spend on projects.

Dermot Mulligan, principal officer in the department, said many items that helped the 2003 Exchequer figures may not be repeated this year.

He said in the capital taxes area, where there was a 112% in Exchequer's take last year, property transactions play a large role and there was no guarantee of a repeat in 2004.

"Transactions take place and people may try to realise gains; whether other people make similar decisions in 2004, it is difficult to predict." He added that the rise in stamp duty 44.7% against a 21.6% forecast was dependent on the housing market remaining buoyant and there were no forecasts for the same type of housing activity this year.

But opposition parties rejected the minister's claims that he will need to borrow as much.

"The reality is, of course, that the minister is talking down the budgetary situation at the beginning of each year so as to justify his cuts in public services, and to take credit at year-end for the unexpectedly good results," Labour's enterprise spokesman Brendan Howlin said. Alan McQuaid, chief economist with Bloxham Stockbroker, said despite the hype surrounding the deterioration of the public finances over the past couple of years, the "underlying trend is still positive and the bottom lime is that Ireland is in a much better position in this regard than the majority of the other members of the EU."

Full year Exchequer returns show that the main tax categories showed growth above what had been forecast in Budget 2003 driven by a surge in capital gains tax, corporation tax and stamp duties.

While there was growth in these areas, VAT receipts were below forecast, coming in 9.4% above 2002, but below the 10.6% rise expected by the department and possibly indicating a slowdown in consumer spending.

Similarly, receipts from excise duties were well off target.

The department said there had been a decrease in the Exchequer take from alcohol, tobacco and petrol duties as there had been a drop in consumption.

Income tax receipts were ahead by just 1.1%, while the Exchequer benefited from gains in corporation tax, which was up by 7.5% for the year.

Overall tax revenue the year was ahead by 9.6% compared to a target of an 8% rise.