Exchequer windfall of €484m

EXCHEQUER figures for January show the Government has a €484 million surplus despite spending on health rocketing by 52%, over January 2004, to €1.15 billion.

Figures released by the Department of Finance show Exchequer figures for the first month of 2005 are well ahead of target with an overall budget surplus of €484m, compared with a surplus of €419m in January last year.

Total tax receipts were almost €3.5bn, almost €80m ahead of the department's projections. Income tax receipts were below target at €845m, while VAT receipts were also lower than projected.

Customs and excise duties, stamp duties and corporation tax were all ahead of forecasts. Current Government spending of €2.9bn was almost in line with projections.

However, IBEC chief economist David Croughan said the increase in spending, at 12.8%, is worryingly large.

"Although it is too early in the year to make definitive judgments, the figures indicate current expenditure is up a massive 19.9%, while capital spending was 50% lower than January 2004. This trend will have to be rapidly corrected," said Mr Croughan.

Bloxham Stockbrokers economist Alan McQuaid noted: "Tax revenue in January was up 9.5% in the year, compared with the official projected increase in the Budget for 2005 as a whole of 5.1% (or 5.4% against the actual out-turn for 2004, which was slightly lower than predicted at the beginning of December)."

Mr McQuaid said based on the expectation of higher tax receipts, the usual savings on the central fund, and lower capital borrowing than officially projected, they are forecasting an Exchequer deficit of €1,800m and a general government balance of close to zero.

"The general government debt/GDP ratio is forecast to post a further decline, to around 29% from 30.5% in 2004," he added.

The figures show that day-to-day spending was up almost 13% in the year to January as against the projected rise for 2005 of 10.4% compared to the actual 2004 out-turn.

"Last year, day-to-day expenditure came in lower than projected, a rare occurrence. Given the new mindset of the Government, and its move to a more 'socially just' strategy, it is probably fair to assume spending is more likely to come in above target than below target this year.

"However, despite that, the overall budget out-turn for 2005 is likely to be better than officially forecast in the budget," Mr McQuaid said.