The Government's finances are deteriorating faster than forecast, according to new economic data. The figures show that the Minister for Finance, Mr McCreevy, may be forced to borrow heavily next year to bridge the gap between tax and spending.
The monthly Exchequer returns for October, released by his Department yesterday, show that spending is increasing by 20 per cent while tax revenues are up by only 2.6 per cent. The returns were released as monthly unemployment figures showed the first year-on-year rise in five years.
Commenting on the worsening economic situation, the Tβnaiste, Ms Harney, reiterated that there would be no cut in the top tax rate in next month's Budget. Instead, tax relief will target low earners.
Mr McCreevy may now have to target his first Budget deficit since 1997. Economists believe he may need to borrow as much as £1 billion next year, representing the biggest government borrowing binge since 1987.
The figures also indicate a low rate of participation in the bogus non-resident account tax amnesty, which closes later this month.
The sharp fall-off in income is mainly due to rising job losses across all industry sectors.
Yesterday's Live Register figures for October showed the first year-on-year rise since 1996, as the unemployment rate rose to 3.9 per cent and the economy suffered one of its worst weeks for job losses in recent years. More than 1,000 jobs have been lost in the last three days, the largest in Navan, where Tara Mines laid off its 700-strong workforce.
The job crisis was further compounded by the decision of Teradyne, a US technology company, to defer a promised 800-job investment in Cavan town. Teradyne supplies equipment to the telecoms industry and has deferred the investment indefinitely, following losses of more than $50 million in the third quarter of this year.
Earlier job losses showed up in declining income tax receipts. In the first 10 months of the year, key income tax receipts are up only 1.8 per cent, compared with 3.6 per cent at the end of September and a Budget day target of 8.4 per cent.
According to IIB Bank's chief economist, Mr Austin Hughes, income taxes were down 9.5 per cent in October compared with the same month last year. At the end of October, the Exchequer surplus was £1.78 billion, down from £2.9 billion at the same time last year. According to Mr Hughes, the surplus is likely to be whittled down to just £700 million at the end of the year.
Overall receipts were down slightly in the first 10 months of the year, although overall tax receipts were up 2.5 per cent.