Donohoe warns departments as Government spending jumps 15% in first quarter

Minister for Public Expenditure Paschal Donohoe has warned Government departments to manage their spending and “to remain within profile” after the latest exchequer returns pointed to a significant build-up in budgetary pressures.

Government spending totalled €22.8 billion for the first three months of the year, which was €2.9 billion or 14.9 per cent above the same period in 2023, the figures showed. The Department of Finance said specific sectors were reporting significant pressures with current expenditure ahead of profile by €275 million or 1.3 per cent.

The over-run in current expenditure was, however, offset by lower-than-anticipated capital spending but this is expected to unwind later in the year.

“Even with the substantial level of investment across Government, expenditure pressures are emerging in certain sectors, including our education and health sectors,” Mr Donohoe said.

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“At this early point in the year, the first-quarter returns act as a real reminder of the need for all departments to manage their spending and to remain within profile,” he said.

“It is vital that fiscal policy strikes the right balance between continuing to invest in critical services whilst also ensuring our plans are sustainable for the health of the public finances,” Mr Donohoe said.

One of the biggest jumps in annual expenditure related to social protection and the Government’s decision to deliver a once-off double week welfare payment in January, he said.

The Minister said going forward the Government’s expenditure decisions would have to take into account the fall-off in headline inflation.

The exchequer figures indicated that capital expenditure came to €1.7 billion in the first quarter. While this was 45.5 per cent ahead of the same period last year, it was 13.6 per cent below profile.

Tax revenues in the first quarter of the year were €20.1 billion, 1.8 per cent ahead of the same period in 2023. Combined with the expenditure figures, this gave rise to an exchequer surplus of €0.3 billion.

This was an improvement of about €2.3 billion on the previous year but this is largely due to the transfer of €4 billion to the National Reserve Fund in the first quarter of last year.

Peter Vale, tax partner at Grant Thornton Ireland, said: “There was mixed news for the exchequer in the March tax figures, with a large drop in corporation tax receipts the main feature.”

“Of most concern will be what today’s figures mean for full-year corporation tax returns. The March figures are likely to have been heavily impacted by tax payments made by one or two very large groups, based on lower profit forecasts for 2024. If this trend continues we could see similar drops in corporation tax receipts for the remainder of the year,” he said.

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