State on course to eliminate borrowing before 2018

Taoiseach Enda Kenny will issue an emphatic pledge today to reinforce the recovery and run “sensible” budgetary policy if he wins the general election.

Ahead of strong exchequer returns on Wednesday, he will tell a public meeting in Co Kildare he will not undermine the turnaround if returned to office.

The figures show the State is on course to eliminate the headline budget deficit earlier than 2018, the Coalition’s current target.

Tax receipts are almost €3 billion ahead of target, with borrowing this year now set to come in well below 2 per cent of economic output.

“We will not threaten that progress,” Mr Kenny will say at a post-budget event in Newbridge. “In future all public spending increases will be below the underlying growth rate of the economy.”

Reassurance

Mr Kenny’s address to the meeting, at which Tánaiste Joan Burton will also speak, is cast as a message of reassurance to voters that the Coalition parties will not put recovery at risk for electoral advantage.

His intervention today follows criticism from the Irish Fiscal Advisory Council of the Government’s decision to increase supplementary spending this year in the days before the October budget.

The Government has dismissed such criticism, insisting there is no departure from prudent management of the economy.

However, private political polling points to concern among voters about the possibility the next administration could follow policies that would threaten the recovery.

The Government has been operating on the basis it will balance the books within three years if it wins the election.

However, Minister for Finance Michael Noonan told the Oireachtas finance committee on Tuesday evening that an early elimination of the deficit was now in prospect.

“As it looks now, we’re going to have a balanced budget ahead of 2018,” said Mr Noonan.

The Minister told the committee November tax receipts came in about €470 million ahead of target, adding that receipts accumulated since January have exceeded the official target by “a shade under €3 billion”.

Such figures, which reflect strong corporate tax and VAT receipts, suggest the Revenue has come close to collecting the €42.3 billion foreseen for the whole of 2015 in the first 11 months of the year.

Revised downwards

Mr Noonan said in his budget day speech in October the headline deficit at the end of 2015 was on course to come in at 2.1 per cent of gross domestic product, down from his original 2.7 per cent target.

This figure has now been revised downwards again. Assuming December tax receipts come in as forecast, Mr Noonan said a year-end deficit “probably around 1.7 per cent” was now likely.

Although budget 2016 was predicated on a headline deficit of 1.2 per cent of GDP next year, Mr Noonan said the deficit in 2016 was now set to drop to 0.7 per cent or 0.8 per cent.

The Minister rejected criticism the Coalition was relying too heavily on “windfall” revenues from corporate tax.

Mr Noonan cited a a letter from Revenue chairman Niall Cody in which the tax authority said all but €300 million of the current surge in corporate tax was not cyclical.

“The vast bulk will be repeated next year,” he said.

“The Government is extraordinarily prudent in how it manages the public finances,” he added.

“From the start of 2014 until the end of 2016 the increase in expenditure was 4 per cent, the increase in tax was 15 per cent and GDP was up 18 per cent.”