FOR THE best part of a decade, the publication of Exchequer returns barely caused a ripple of concern in Government Buildings.
Even the escalating clamour on over-reliance on property and capital taxes was dismissed by the Government as misguided negativity. Last month's returns, released yesterday, are deserving of much more than modest concern. They confirm that tax revenue is down dramatically, borrowing has shot up and that the Government did indeed put far too many eggs in the one basket.
The tax take, for the first 10 months of the year, is €4.3 billion less than the Government's own forecast and the receipts for October itself are down €3 billion on the comparable figure for last year. The Exchequer is now running a deficit of €11 billion, an increase of €7 billion on the situation this time last year. The figures are truly awful and, if anything, they are likely to deteriorate further as the gap between revenue and expenditure continues to widen. The returns for the month of November, when published, will determine the true state of the shortfall heading into 2009.
On Monday, the European Commission said it will recommend the opening of an excessive deficit procedure against Ireland. Under the EU's stability and growth pact, budget deficits being run by member states must be below 3 per cent of gross domestic product. The Government has admitted that the debt ratio will climb to 6.5 per cent. The Commission takes a bleaker view - as it does on the extent to which the economy will decline next year. Fine Gael deputy leader Richard Bruton argues that, in contradicting the Government's estimates, the Commission effectively has expressed no confidence in the Government's ability to turn the situation around.
Ireland is not the only member-state likely to breach the 3 per cent rule in 2009; at least six others are expected to do likewise. What is of particular concern though is the speed with which the State's finances have deteriorated and the absence of any credible plan to put the finances back in order.
Minister for Finance Brian Lenihan says that further cuts in public spending and more tax increases may be necessary in order to bring the deficit under control; he could usefully have substituted the word "may" with the word "will". Mr Lenihan blames external factors for the deterioration in the Exchequer finances and is guilty of denial in not acknowledging the Government's own role in the downturn. But what is of more concern is whether he is up to the task that faces him.
He failed to bite the bullet on spending in his Budget and many of the measures he did introduce were cack-handed proposals which came down hardest on the most vulnerable. Mr Lenihan must wake up to the fact that any delay both in tackling spending and getting the deficit under control will greatly damage the economy and postpone recovery. A mini-budget seems unavoidable. If so, it must contain spending cuts which are extensive, which protect the vulnerable and which should have been tabled last month.