Consumer spending credited for strong returns

Robust consumer spending led to a strong performance in the public finances over the first three months of the year.

Figures released by the Department of Finance yesterday show that tax receipts came in some €221 million ahead of expectations in the three months to the end of March.

The main reason for the overshoot was a boom in VAT revenues, which were €139 million ahead of Department of Finance forecasts. The department's officials pointed to a "strong pick-up in personal consumption" in the first quarter.

Evidence of this has already been seen in figures for new car sales, which have been running ahead by 20 per cent on 2004. General retail sales figures have also been very buoyant.

The new Exchequer figures also highlight the continuing strength of the property market, with stamp duty receipts beating expectations by €38 million in the first three months.

These unexpectedly high tax receipts helped to leave the public finances in surplus by €880 million at the end of March. This compared to an Exchequer surplus of €272 million at the same point of 2004.

The increased surplus was also driven by the expenditure side of the Exchequer, with a number of Government departments spending less than expected in the first quarter.

Department of Finance officials said yesterday that €438 million in budgeted Exchequer funds remained unspent at the end of March.

They blamed timing factors for the under-spend, predicting that all cash allocated to Government departments for 2005 would be spent by the end of the year.

It remains unclear at this stage how the public finances will be affected by the possible €2 billion bill the Government faces for illegally docking money from patients in long-term public care.

Department officials would only say yesterday the Government had already promised that services would not be cut back because of the liability.

Labour spokeswoman on finance Joan Burton was unimpressed. She accused the Government of allowing investment in the State's economic future to fall behind.

Fine Gael's finance spokesman, Richard Bruton, meanwhile called on the Government to start delivering better value for money.