Shock figures show buoyant economy

FINANCE Minister Brian Cowen is in a very strong position to frame a generous giveaway budget next Wednesday, following the release of remarkable Exchequer returns this morning.

The pre-budget White Paper on the State’s finances for 2004, published early this morning, shows a buoyant economy, that has spectacularly exceeded Department of Finance projections.

Finance’s latest assessment is that the €2.8 billion Exchequer deficit projected for this year will be virtually wiped out.

The current projection is the deficit will be only €200 million by year’s end.

Given that December is traditionally a good month for Exchequer receipts, there is a strong possibility of a surplus.

The strong performance is illustrated by a further €500m improvement in the projected out-turn within the past week. In the Estimates last week, Mr Cowen estimated the deficit would be in the order of €700m.

There is another remarkable turnaround in the more widely defined General Government Balance (GGB), which also includes in its calculations local government, the Social Insurance Fund, non-commercial semi-State bodies and the National Pensions Reserve Fund.

Former Finance Charlie McCreevy predicted a €1.63bn deficit in GGB.

However, yesterday’s White Paper projects it will have a surplus of €1.36bn.

That is an astonishing €3bn better than predicted.

Mr Cowen estimated the economy would grow by 5% in 2005 coupled with a 2.1% increase in inflation.

This is reflected in the Estimates for tax revenue in 2005, which foresee an increase of €2bn to €37.7bn. In contrast, non-tax revenue is expected to fall marginally, down from €767m to €596m.

Fine Gael deputy leader Richard Bruton attacked the Government’s fiscal strategy saying the figures on taxation revenue showed every household in the country paid an extra €2,800 on average in taxes this year compared to 2003.

“The Government has collected an unprecedented volume of taxes this year with €3.9m more collected than in 2003,” he said. The figures allowed Mr Cowen scope to row back on so-called stealth taxes by indexing tax bands and PAYE cut-off points he said.

Labour finance spokeswoman Joan Burton said the minister had ample scope for a reforming budget. “The minister’s priorities should be fairer taxation and wiser spending.”

She also called for a substantial increase in the standard rate band and for tax loopholes to be closed off.