Borrowing target to be cut due to strong tax returns

The Government is to revise down its borrowing target for this year in the light of exchequer returns for 2015, to be published today, which will show strong tax trends continuing to the end of the year. In the October budget, Minister for Finance Michael Noonan set a borrowing target of 1.2 per cent of GDP for this year, but the strong trend in tax receipts means he will indicate today that the likely out-turn will be significantly lower.

Boosted by once-off receipts from AIB of €1.6 billion in December, the exchequer's cash position is expected to be close to balance for 2015, with indications a tiny deficit of less than €100 million is on the cards.

Once-off receipts such as the money from AIB are excluded from the EU estimate of our borrowing, which aims to measure the underlying picture.

Borrowing below 2%

On this basis, borrowing for 2015 is now likely to come in below 2 per cent of GDP, compared to the 2.1 per cent figure estimated in October. This will feed through to a reduction in the expected level of borrowing for this year. The figures are to be announced at lunchtime by Mr Noonan and Minister for Public Expenditure

Brendan Howlin

, in a presentation to be held before the weekly Cabinet meeting. With a general election approaching, the two Ministers are expected to focus on the sharp fall in exchequer cash borrowing, which was over €8 billion in 2014 and was close to balance last year, following the unexpectedly strong surge in tax revenues.

Mr Noonan is expected to say that borrowing this year will now be lower than the 1.2 per cent budget target, though he will not give a new forecast as significant technical work is needed to agree the level of borrowing for 2015 as measured by the EU rules.

The exchequer figures for November had shown tax revenues were more than €2.9 billion ahead of target in the first 11 months, driven in large part by surging corporate tax revenues. It is understood that corporate tax revenues were in line with original expectations in December, meaning the strong surge seen in earlier months was not repeated.

Income tax growth

However, strong growth in income tax was recorded for December, reflecting rising employment and wages.

At the end of November, the exchequer had a cash surplus of €322 million. Normally borrowing is heavy in December and would have been expected to put the exchequer into a significant cash deficit for the full year. However, due to the AIB payment, the final result will be close to a balanced cash position for 2015.