Government spending fell by €8bn last year

Total spending by the State fell considerably last year, while its combined sources of income rose slightly, according to public accounts figures published yesterday by the Central Statistics Office.

Despite this, the State still had to borrow more than €1 billion each month in 2012 to finance the gap between spending and revenue.

Total Government spending fell by more than €8 billion between 2011 and 2012, to reach €67.2 billion.

The fall was attributable to a decline in capital expenditure. Bank recapitalisation costs, at €280 million last year, were a fraction of the €6.8 billion spent in 2011. Last year’s spending on bailing out the banks was by far the lowest since the banking crisis began.

Other capital spending, on items such as road and bridges, also registered a steep decline, falling from €4.1 billion in 2011 to €2.7 billion last year. At peak in 2008, such investment spending stood at just under €10 billion.

Current spending, at €61.9 billion, was unchanged on 2011.

Total Government income (excluding monies borrowed) stood at €54.4 billion, an increase of 2.2 per cent on 2011. Receipts, however, remained far below the pre-crisis peak of more than €67 billion.

The figures contained in yesterday's detailed 102-page publication are compiled on the basis of EU-wide standards, thus making them comparable with other jurisdictions. They are also compiled on an accruals basis, unlike the much narrower set of exchequer data figures published each month by the Department of Finance.

The cost of servicing the national debt continued to rise sharply in 2012, surpassing the €6 billion threshold for the first time. In 2007, debt servicing costs stood at €2 billion.

Interest payments

Then, about half of interest payments went to Irish residents and half went abroad. Now, because almost all of the borrowings raised to fund the gap between spending and revenue since the recession began have come from abroad, the lion’s share of interest payments flow out of the country. Last year, interest payments of more than €4.6 billion left the economy.

For the second consecutive year, the amount spent on unemployment benefits fell. Last year, spending on the two main supports for the jobless declined by €119 million, to stand at just over €3.9 billion.

Spending on payments to households for medicines purchased from pharmacies rose marginally last year to €1,256 million. Despite efforts to bring prices into line with other jurisdictions, this spending has remained broadly unchanged since 2008.

The largest annual increase in social transfers was spending on subsidies for the elderly, such as free travel and electricity, which grew by 20 per cent on 2011 to reach €534 million last year. This spending has risen consistently since the recession, largely reflecting the growing number of pensioners as the population ages.