Exchequer in red by €5.6bn as tax take falls short
The Exchequer was in deficit by more than €5.6 billion at the end of June, after tax receipts fell short by some €1.45 billion, according to figures published this evening.
Publishing the Exchequer statement for the year to June 30th, Minister for Finance Brian Lenihan said that because of the changed economic circumstances, including the tax figures and a weaker property market, he has published a revised economic forecast for 2008.
Mr Lenihan said the Government will take “firm action now” to ensure the public finances are kept on a sustainable footing and that the Government will examine a “package of measures” to that effect next week.
But he said: “I don’t think we should be talking ourselves into a recession.”
Speaking on RTÉ's Six Onenews Mr Lenihan said he would make "definitive announcements" next Tuesday on the Government's spending plans for the rest of the year.
He predicted borrowing at an "absolute outer limit" of about €5.4 billion, which he said was not simply a question of keeping within EU rules for borrowing, but which was "a matter of prudence and common sense".
The Minister predicted overall economic growth this year of about a half percentage point and he insisted the Government was facing the current economic challenges “from a position of strength”.
“Sound public finances have been critical to Ireland’s success over the last decade and are key to future growth. The Government will be examining a package of measures to be announced to the Dáil following next week’s Government meeting,” Mr Lenihan said in a statement earlier.
He warned that the outlook is for tax revenues to remain weak for the remainder of this year.
“Consequently a tax shortfall of the order of €3 billion has now been factored into the budgetary arithmetic for this year,” the Minister said.
Total current receipts in the first half of 2008 were €19,525 million compared to receipts of €21,124 million for the same period in 2007.
Tax Revenue, at €19,127 million is €1,450 million, or 7 per cent, behind profile due mainly to the poor performance of VAT and Capital Gains Tax, the Minister said.
Non-tax revenue in the first six months of 2008 was €398 million. This compares to €310 million for the same period last year.
Capital receipts for the first six months amounted to €1,322 million compared with €907 million for the same period last year.
Total net voted spending at €22.7 billion at the end of June was 0.9 per cent below budget. Year-on-year spending growth for the first half of the year was 11 per cent. The revised estimates provide for an increase of 9.5 per cent for 2008 as a whole, Mr Lenihan said.
Net voted current spending in the first six months of 2008 at €19.5 billion was €177 million or 0.9 per cent below the published profile. Year-on-year growth in the first half of 2008 was 8 per cent. The Revised Estimates provided for an increase of 9.1 per cent for 2008 as a whole.
Net voted capital spending in the first six months of 2008 at €3.18 billion, was €28 million or 0.9 per cent below the published profile. When compared with the first half of 2007 the increase was 31 per cent or €758 million.
“These results confirm the trend already established this year of lower than expected tax revenue receipts. This is due largely to lower growth than projected at Budget time and to a fall off in tax receipts as a result of weaker property market activity,” Mr Lenihan said in a statement.
”Because of this and in the light of the latest economic data available at end-June, my Department has today published a revised economic forecast for 2008.
“Overall economic conditions across the economy remain sound with growth outside the housing market (in the manufacturing, services and agricultural sectors) expected to be a little higher than 4 per cent.
“GDP and GNP growth of around ½ per cent is now expected for this year. The downside risks identified in the Budget have materialised in terms of the extended credit crunch, all time high oil prices and adverse exchange rate movements together with weaker domestic demand.”
In the revised economic outlook published with today's returns, Mr Lenihan predicted a "modest pick-up" n overall growth next year,perhaps to around 2.25 per cent.
"It is expected that as output in the housing area returns towards sustainable levels, trend growth of about 4 per cent per annum can be achieved over the medium term," the forecast said.