GOVERNMENT BORROWING for day-to-day spending has swelled to €14.7 billion, boosted by an outflow of €6 billion in payments to bail out the banks and continued weakness in tax revenues.
The latest exchequer figures, published yesterday, show that tax receipts for the first six months of the year were down 17.3 per cent, or €3.3 billion, compared to the same period last year.
Minister for Finance Brian Lenihan said last night that the latest exchequer returns were close to his department’s estimates and showed that the measures introduced in the April budget to stabilise the Government finances were starting to take effect.
Opposition parties, however, said the figures were evidence of the dangerous position facing the country.
“The rate of decline in overall tax revenue has eased,” Mr Lenihan said.
The half-year deficit of €14.7 billion stands in contrast to borrowings of €5.7 billion a year ago. The €9 billion difference is attributable to a mixture of the tax shortfall and payments to refinance AIB and Bank of Ireland, and to nationalise Anglo Irish Bank.
Fine Gael deputy leader and finance spokesman Richard Bruton described the figures as disappointing. He said in the month of June alone, the gap between actual revenue and that projected only nine weeks ago was €224 million.
“If this trend was to continue for the next six months the Government deficit will be €1.5 billion off target,” Mr Bruton said, adding that the figures again demonstrated the deep hole in the public finances, mainly caused by bad policy decisions.
Labour Party deputy leader and finance spokeswoman Joan Burton said that when the exchequer figures were taken in tandem with the rise in unemployment, it revealed the depth of the crisis facing the country.
“These figures highlight what families around the country, facing unemployment, reduced incomes and higher taxes brought about by Government mismanagement, are experiencing on a daily basis,” she said.
While the rate of decline in tax revenues has eased slightly, helped by timing factors, overall receipts are still slightly behind the expectations of the Department of Finance for this point in the year.
Department officials said this €188 million shortfall on their expectations amounted to a 1.2 per cent difference.
Tax came in behind forecasts under a number of heads, notably VAT and income tax. Officials said this was a “reflection of a weaker economy” and the associated slower labour market.
Figures released earlier this week showed the number of people claiming unemployment benefits has soared by almost 200,000 over the past year, while large numbers of those working have faced wage cuts and are thus paying less in tax.
So far this year, the State has received slightly more than €340 million in income levies.
Corporation tax was slightly ahead of expectations in the first half, due in part to a change in payment dates and in part to some companies paying more than the department had anticipated.
Officials said it was still “very early days” on this front, while employers’ group Ibec insisted that VAT and income tax receipts demonstrated the economy was “showing no signs of having turned a corner”.
On the expenditure side, the Government has spent €530 million, or 2.3 per cent, less than forecast at this point in the year.
Total spending amounted to €22.9 billion, compared to €22.7 billion a year earlier. The Department of Finance highlighted a €100 million underspend in social welfare, with this attributable in part to delayed unemployment benefit payments. Spending was below expectations in agriculture and education.
On the capital side, the Government spent less than forecast in transport, education and environment, with timing again a factor.
In general terms, spending is “on target”, officials said, adding that the information they had to hand suggested spending should remain in line with expectations for the year.