Tax receipts surge as Coalition gets budget windfall

A surge in tax receipts has bolstered the Government's hand as it prepares for the final talks on Budget 2016 and confronts a huge health spending overrun.

Exchequer figures to be released on Friday will put the Coalition in a strong position to proceed with at least a partial restoration of the Christmas welfare bonus in December and to provide a €600 million supplementary health budget to tackle overspending this year.

Amid mounting speculation in political circles about the prospect of an early general election, the figures will show that tax payments in September beat the official target by more than €300 million.

The data will also show that tax receipts in the first nine months of the year exceed Department of Finance targets by more than €1.7 billion.

This puts tax collection on course to come in €2 billion ahead by the end of the year.

Minister for Finance Michael Noonan and Minister for Public Expenditure Brendan Howlin will unveil the monthly figures later.

The data comes amid pressure within Government to go beyond the tax and spending targets it set in April for the budget on October 13th.

Tax cuts

Mr Noonan and Mr Howlin insist there is no scope to increase the expansionary budget package beyond a range of €1.2 billion to €1.5 billion, which is to be divided equally between tax cuts and spending increases.

They have been supported in that stance by Taoiseach Enda Kenny and Tánaiste Joan Burton.

The Government is obliged under European rules to bring the budget deficit below 3 per cent of economic output this year.

It is understood, however, that a deficit just below 2 per cent of gross domestic product is now in play, well ahead of the 2.3 per cent forecast last April and the 2.7 per cent projection on which Budget 2015 was predicated one year ago.

ESRI forecasts

In line with an ESRI forecast this week and an acceleration of growth in the first half of 2015, the Government now expects GDP growth for the full year to come in at 6 per cent. The projection may not be confirmed until budget day.

Still at issue in the budget talks is the allocation of up to €750 million for new spending measures this year.

The sum of money in play is far less than total expenditure “bids” of some €5 billion which Mr Howlin has received from line departments.

The biggest of these was a €2 billion demand from the Health Service Executive, which was dismissed as “unrealistic” in the Cabinet subcommittee at which the Taoiseach and Tánaiste set policy with Mr Noonan and Mr Howlin.

Sources said the negotiation between the departments of health and public expenditure remained the most difficult of all budget discussions.

The talks centre on two spending streams: an increase in funding to maintain existing services in 2016 and additional funding for service development.

“There are things introduced this year that will cost more in a full year, like free GP care to the under-sixes and over-70s,” said an informed source.

Talks on service development follow demands to introduce new medicines and expand initiatives such as Breastcheck and the cancer screening programme.