Exchequer in red by €9.4 billion at end of September

 

The Exchequer was some €9.4 billion in the red at the end of September as tax revenues continued to decline.

An Exchequer statement published this afternoon by the Department of Finance said the deficit was €9.404 million at the end of September and tax revenue was nearly €3.6 billion, or 11.2 per cent, behind the expected target.

The deficit of €9 billion compares to a €3 billion deficit at the same time last year.

Minister for Finance Brian Lenihan predicted the tax take for the year would now be some €6.5 billion behind what was predicted at the start of 2008.

Mr Lenihan warned that the forthcoming Budget would be "tough".

The Minister said the Exchequer was now in a state of "very serious deficit" and that the slowdown in growth was now at a stage where growth would be "at nought, or possibly minus nought" for the year.

“It will have to be a tough budget. I don’t think we have any choice this year. I think we have to face the changed realities and plan for them," he said.

Fine Gael said the worsening public finances indicated the economy had "slammed into brick wall", while Labour said they were "calamitous".

Total tax revenue in the nine months was €28,478 million. Department of Finance assistant secretary Michael McGrath told reporters at an official briefing that he expected the State's tax take would be a further €3 billion behind profile by the end of the year.

Non-tax revenue in the nine months to end-September was €603 million. This compares to €436 million for the same period last year, the Department said. Capital receipts to end-September amounted to €1,348 million compared with €909 million for the same period last year.

The Government is now predicting an overrun of some €600 million in spending by the end of the year.

Mr Lenihan warned that "difficult decisions" will need to be taken and that the October 14th Budget will be framed accordingly.

In a statement, he said: “The sharp deterioration in economic growth that we have seen reflects the more challenging international conditions as well as the substantial correction in the property market that we are experiencing."

Mr Lenihan said this was obviously affecting tax revenues and that over the summer months the weakness in receipts had "continued at a pace".

"In particular, the performance of VAT, capital gains tax and stamp duty receipts is disappointing and reflects developments in the property market as well as weaker economic activity. As a result of these trends a shortfall of the order of €6.5 billion on tax revenue is currently estimated."

The Minister said overall Government spending at the end of September was 10.1 per cent ahead of the same period last year.

"There are a number of spending pressures, mainly in social welfare. As a result, an overrun of the order of €600 million on net expenditure is now likely."

Mr Lenihan said the Government is continuing to take action to deal with "the challenging economic situation".

"Difficult decisions will be required to stabilise the public finances. In that context, Budget 2009 will be framed to provide the stability required and to help to ensure that our economy will be well placed to take advantage of more favourable international conditions in the future," he said.

"Given our low debt ratio, our educated and young workforce and our low tax environment for workers and business, we are better placed than before to deal with the current challenges. Taking decisive action now is necessary to help ensure fiscal sustainability over the medium-term."

Fine Gael finance spokesman and deputy leader Richard Bruton said the Irish economy had "slammed into a brick wall" and it was "ordinary families" that would feel the impact of the crash.

Mr Bruton noted Government borrowing will be five times more than projected by Taoiseach Brian Cowen on Budget Day.

"This Government is now on track to double the national debt in four years," Mr Bruton said.

"For the first time in 12 years the Government is borrowing money to fund day-to-day spending, instead of following the golden rule of borrowing only for capital purposes. We are now seeing the price of years of self-indulgent spending policy, lack of reform, and denial of the obvious dangers of reliance on a property boom."

Labour’s finance spokeswoman and deputy leader Joan Burton said the figures were “calamitous”.

“The common thread running through the banking crisis and the fiscal crisis is how Brian Cowen’s property boom built up an unsustainable house of cards, which is now collapsing around all of us,” said Ms Burton.