Clock ticking for Coalition to deliver on spending pledge

The clock is ticking on the Coalition to deliver on a big commitment it made only last month, after exchequer figures yesterday showed a large part of an extra €1.5bn spending pledge has yet to be spent this year.

The focus yesterday fell on the scale of the tax revenues — in particular on the unexpectedly huge corporate tax bounty — that has filled Government coffers to date.

However, economist Conall MacCoille at Davy Stockbrokers said there is no sign in the tax-and-spend figures that the Government had spent a significant part of the extra €1.5bn it pledged to spend by the end of the year.

It has four weeks to spend the cash or run the risk of complicating the budget sums for a new administration after next year’s election by which time new stricter EU spending rules will have come into force.

Yesterday’s figures showing that the exchequer has so far collected €6.36bn in corporate taxes — €2.33bn more than it thought it would take in — has deepened the mystery surrounding the company tax bounty.

It will strengthen suspicion that the worldwide crackdown on multinationals paying too little tax has led to companies paying more in low-tax Ireland, said Alan McQuaid, chief economist at Merrion Capital.

The Government has strongly denied that the surge in corporation tax receipts is a bubble similar to the property boom in 2007.

Tánaiste Joan Burton dismissed suggestions that the booming tax receipts are because of an over-reliance on corporation tax.

“Ireland really has become a niche in terms of a service island for a huge number of world-class, IT and pharma and other international companies. The exchange rate is also very good in the euro point of view vis-a-vis the dollar and sterling, so our competitiveness is very strong,” she said.

She said the coalition will have “eliminated” the budget deficit entirely by 2016 and 2017 if the recovery continues.

However, the Opposition were quick to pick holes in the positive economic news.

Fianna Fáil’s finance spokesman, Michael McGrath, called on the Government to set up some form of contingency fund to help buttress the economy from any potential future economic shock.