ALL TARGETS to bring the public finances under control were met in the first three months of the year, the Department of Finance said yesterday.
The exchequer returns for the first quarter of 2012 show that public spending and tax revenues were broadly in line with projections set out at the end of last year. Commenting on the results, Minister for Finance Michael Noonan said the first quarter tax results “show a strong start to the year and highlight the robust nature of the Budget 2012 tax forecasts”.
Although it is too early to conclude definitively, fears that the two percentage point increase in value added tax, introduced on January 1st last, would kill off consumer spending have not materialised. VAT receipts were up on the same period last year and ahead of the department’s own projections.
More generally, total tax revenue rose between the first quarter of this year and last. This suggests the economy may not be as weak as some other indicators have suggested.
Less positively, a significant overrun in welfare spending was recorded and debt servicing costs were sharply higher.
Total exchequer spending in the January-March period exceeded revenues by €4.3 billion. This was €2.8 billion less than in the same period a year ago. The difference was largely because exchequer funds were not used to pay interest on the bank bailout promissory notes.
Earlier yesterday, the Irish Fiscal Advisory Council, a recently established watchdog comprising five academic economists, repeated its view the Government should be more ambitious in its deficit and debt-cutting efforts.
The council, which is tasked with critiquing the Government’s economic and budgetary projections, sees the risks of the public finances spiralling out of control as big enough to warrant stronger measures. It is of the view that additional tax and spending cuts should be implemented this year if the deficit target is at risk of being missed. This puts it at odds with the International Monetary Fund, which has said further measures should not be introduced if targets are missed owing to lower-than-expected economic activity.