Government deficit as percentage of GDP worse than Greek at 12.7%

Thu, Sep 6, 2012, 01:00

THE CENTRAL Statistics Office said yesterday the Government spent €20.2 billion more than it took in last year.

The deficit figure was €360 million below the most recent Department of Finance estimate.

Despite this, the deficit as a percentage of gross domestic product (GDP) stood at 12.7 per cent, the largest in the EU and above that of the country with the second largest deficit, Greece, whose deficit stood at 9.1 per cent last year.

Excluding the €5.8 billion used to recapitalise the banking system last year, the Government’s underlying deficit stood at €14.4 billion, or 9 per cent of GDP. At its peak in 2009, it reached €18.5 billion.

Yesterday’s “general Government” figures provide the most comprehensive measure of revenues and spending. Both are considerably larger than the better-known exchequer figures because they include, among other things, social insurance contributions and local government spending.

Because these figures are compiled on an internationally comparable basis they are the most closely observed.

Total general Government spending last year stood at €75.3 billion when bank recapitalisation costs were included. Last year was the third consecutive year when very large amounts of public money were used to bail out the banks.

Stripping out of bank rescue costs gave a clearer underlying picture of the State’s recurring spending commitments. This measure showed spending fell for the third consecutive year in 2011.

Across most spending categories, budget cuts were to be seen taking effect. Spending on child benefit fell for the third consecutive year, bringing the cumulative fall since 2008 to almost one-third – the largest reduction of any of the main social benefits.

That said, the €2 billion outlay last year remained three times higher than in 2000.

The State’s two main pharmaceuticals budgets showed few savings had been made despite a commitment to increasing the comparatively low use of cheaper non-branded drugs.

Last year, spending on medicines stood at more than €1.9 billion. Although this is down 6 per cent from its peak in 2009, it remains above pre-crisis levels of 2007. As recently as 2003, State spending on pharmaceuticals was half the 2011 level.

Over the past decade, Irish pharmaceuticals prices have risen at three times the rate recorded across the EU, on average.

Income tax and social insurance contributions combined stood at €26.1 billion last year. This marked a 5.2 per cent increase on the previous year and was the first annual increase in these sources of revenue since the recession began.

Despite large increases in the rates of tax on personal income in recent years, income tax and PRSI receipts remained €4 billion below 2007 levels last year.

The total amount of debt accumulated by the State at the end of last year stood at just over €169 billion, an increase of €25 billion on a year earlier. As a percentage of GDP, debt rose from 92.2 per cent in 2010 to 106.4 per cent last year. Among the 27 members of the EU, this was the third highest after Italy and Greece.