TAX REVENUES collected by the Government in the first two months of 2010 have fallen more than €1 billion behind the same period in 2009, it emerged yesterday, as the State’s largest bank, Allied Irish Banks (AIB), refused to rule out seeking further Government cash injections.
The latest exchequer figures from the Department of Finance show that Ireland’s budget deficit worsened to €2.4 billion at the end of February. A further drain on the public finances is expected following an admission by AIB managing director Colm Doherty the bank may have to turn to the State for financial support if it cannot raise sufficient cash selling businesses or from investors.
AIB, which has already received €3.5 billion from the State, yesterday reported the first annual loss in its 44-year history. The bank posted a loss of €2.65 billion for 2009 after writing off €5.4 billion on bad loans primarily to property developers and land speculators. Some €3.4 billion of the write-offs related to loans heading into the National Asset Management Agency (Nama). It was “highly likely” the Government would have to take a direct stake in AIB after Bank of Ireland handed over a 16 per cent stake to the State last month instead of a dividend payment due on the Government’s €3.5 billion indirect stake, said Mr Doherty.
In a statement last night, Minister for Finance Brian Lenihan said AIB’s loss showed Nama was “forcing the banks to finally face up to the reality of their bad loans”. “Were it not for Nama, the banks might still be nursing their loans in an attempt to spread their losses over a prolonged period. This might benefit their shareholders, but it would choke the prospects of economic recovery.”
Both the exchequer figures and the Government’s banking strategy were attacked by the Opposition yesterday. Fine Gael deputy leader Richard Bruton warned the “blank cheque for banks” policy must end and that their bad investment decisions should not be the responsibility of taxpayers. He described the exchequer data as evidence that Ireland risked “sinking into a vicious cycle” of plummeting tax revenues.
Tax receipts were 1.3 per cent or some €64 million lower than Government targets for the first two months of the year, arriving at a total of €4.73 billion.
Labour Party deputy leader Joan Burton said the lack of any “fabled green shoots” was “a hammer-blow to an increasingly shaky Government”.
Austerity measures have resulted in a 10 per cent decline in public expenditure. Spending in the first two months of 2010 was €817 million lower than the same period last year. Following a 17.8 per cent year-on-year plunge in tax receipts, the exchequer deficit has widened by €323 million compared to its position at the end of February 2009. So far in 2010, some €338 million of tax receipts has been used to pay interest on the national debt. This figure is up €163 million on 2009.