Government spending up by 33%

Government spending in January was running 33 per cent ahead of the same month last year, according to figures published yesterday. The first Exchequer statement for 2003 shows rapid growth in spending last month, although the increase was actually lower than the Department of Finance had expected.

Last night, a Department spokesman said a number of one-off factors had affected the comparison between spending in January 2002 and last month and said the increase did not reflect spending that had been delayed at the end of 2002.

A €115 million payment to An Post was delayed from January to February last year, thus depressing January 2002 spending. This year, he said, child benefit payments of €43 million relating to February fell into January spending. The Department of the Environment also drew down €130 million from the local government fund last month while they did not draw down any money until April last year.

Taxes were slightly ahead of target for the month, due to a surge in VAT, but income tax receipts were weak.

The income tax trend will be watched closely in the months ahead, as a poor performance in this area was the main reason for pressure on Exchequer finances last year.

The figures show a monthly surplus of €284.1 million, compared to €382.7 million in the same month last year.

The figures show "bizarre trends" according to Fine Gael finance spokesman Mr Richard Bruton. Falling income and corporation taxes were a cause for concern.

This year, for the first time, the Department of Finance has published the expected month-by-month trend in tax and spending, allowing comparison with the monthly out-turn.

The spending profile for this year shows that the Department of Finance expects spending to run well ahead of 2002 levels in January and February with a sharp slowdown in the later months of the year.

The Department says the increases in the early months are not due to any carry-over of spending delayed from last year, after restrictions were put on spending in late 2002 to keep borrowing in check.

The 33 per cent increase which took spending to €2.587 billion in January is actually slightly below the 38 per cent increase that the Department figures had forecast. The forecast increase for the year is 7 per cent.

In January, total tax revenues were €2.807 billion, €175 million ahead of the expected €2.628 billion. This was due to VAT coming in €240 million ahead of schedule - probably due to the January sales. Stamp duties came in at €129 million, €24 million ahead of target.

However, income tax at €712 million was €73 million below target, reflecting a weakening jobs market.

Commenting on yesterday's figures, Mr Jim Power, chief economist at Friends First, said they suggested the public finances were likely to remain under pressure from a weakening economy. He said the Minister may need to restrict spending to stay on target.