Exchequer figures are mercifully free of unpleasant surprises
Analysis: A small budgetary buffer provides relief in the Department of Finance
Economic growth is now looking weaker than had been expected when plans for Budget 2013 were drawn up. Photograph: Eric Luke
Every three months, number crunchers at the Department of Finance brief the media and other interested parties on their monthly exchequer numbers.
Following yesterday’s seven-minute briefing, the sparsely attended gathering generated a single question (predictably enough, that question was about the property tax). One official noted at the conclusion of the event that three months ago just two questions had been asked.
One reason for the lack of interest is that the monthly exchequer numbers are becoming pleasingly boring – they have not contained any great surprises for some time.
Closing the deficit
As the accompanying chart illustrates, the smoothed out monthly tax revenue figures show that up to June the Government continued to take more out of taxpayers’ pockets when compared with 12 months earlier. However much this may rankle, closing the budget deficit requires revenues to rise.
The least painful way for revenues to go up is to have a buoyant economy. More activity generates more revenues even if tax rates remain stable.
There is little sign of increased economic activity from across a range of indicators, and economic growth is now looking weaker than Finance’s forecasters had expected when they drew up their Budget 2013 plans.
This makes the seemingly dull findings in the figures in recent times hard to explain. At the beginning of the year, the departmental forecasters prepare very detailed month-by-month predictions on how much tax they expect to take in.
Their predictions have been remarkably accurate despite the underperformance of the economy, with revenues even doing slightly better than predicted six months ago. If that is merely luck, they won’t be lucky all the time. A weaker than expected economy will – sooner or later – begin depressing tax revenues.
But as of the end of June, that hadn’t happened and the income side of the exchequer’s books gives little cause for concern. On the spending side, things look to be on target too, with public expenditure falling ever so slightly below expectation. Given that these figures are prepared on a cash rather than an accruals basis, they always come with something of health warning.
That said, there was nothing in yesterday’s data to suggest that warning lights began flashing in the bowels of the department in the first half of the year when it comes to departmental spending discipline.
Putting the revenue and spending sides of the equation together, the Government built itself a small buffer in the first half of the year, which reduces the risks facing into the second half of 2013 and the 2014 Budget –the unveiling of which is now only a little more than three months away.