Infrastructure spending €392 under target

Capital spending by Government on infrastructure continues to fall behind target, according to the latest exchequer figures.

By the end of last month the Government had undershot its target for the first eight months of the year by €392 million, according to the figures released last night.

When the savings on infrastructure investment are put together with better-than-expected tax revenues, the Exchequer looks set to end the year in a significantly healthier position than forecast on Budget Day.

Minster for Finance Brian Cowen predicted last December that the shortfall in funds that would have to be met by fresh borrowing this year would be €2.988 billion.

Bloxham Stockbrokers' economist Alan McQuaid said last night that the budget deficit at the end of the year "will be closer to €2 billion than €3 billion".

Tax receipts in the eight months to the end of August came to €22.93 billion, some €1.47 billion higher than in the first eight months of 2004 and €855 million ahead of projected levels.

The two big drivers of tax revenues in July and August were stamp duties and excise taxes, according to Davy Stockbrokers. The brokers note that the summer is not a strong time for house sales, and add that it is not obvious why excise duty receipts increased, although they speculated that the good weather may have contributed to alcohol sales.

Corporation tax was running some €202 million behind official forecasts, according to Mr McQuaid.

"This fits with the general weakness in the Irish manufacturing sector so far in 2005, and, at this stage, it looks like corporation taxes will be €300 million or so shy of expectations come year-end."

The tax take is also boosted by monies raised by the Revenue Commissioner's ongoing investigations into tax evasion, including the current inquiry into single-premium investment products. Davy estimates that, when the impact of these funds is stripped out, the tax surplus - the amount by which tax receipts exceed the official forecast - falls from €855 million to €432 million.

Fine Gael finance spokesman, Richard Bruton criticised the Government's failure to meet its capital spending targets. "Irish taxpayers are getting absolutely no bang for their bucks," he said.

"Minister Cowen gave a commitment to extend the capital programme by 10 per cent this year, but as capital spending falls this month to 16 per cent below projection, serious doubt has been cast over the Government's ability to deliver. Public services are creaking and infrastructural projects are behind schedule and pupils are going back to makeshift school buildings this week."

The Green Party honed in on the shortfall in corporation tax. "The exchequer deficit for the year to date is running close on €400 million, a figure that can be largely explained by corporation tax receipts running at € 446 million less than the same period last year," said finance spokesman Dan Boyle.

"These figures, coupled by Minister Cowen's failure to anticipate the effect of rising oil prices, have eroded his ability for any significant innovation in planning toward next year's budget".