Analysis: Initially facing a gaping hole, Mr McCreevy's year ended with a Budget surplus, enabling him to dismiss the doubters again, writes Cliff Taylor, Economics Editor
"With one bound our hero is free." Or so it would appear reading the Exchequer returns for 2002. Having appeared to face a gaping hole in his budgetary arithmetic only a couple of months ago, the Minister for Finance, Mr McCreevy, ended the year with a small cash Exchequer surplus of €95 million, or - using the EU borrowing measures - a small deficit of between €125 million and €250 million.
It was as near to the Budget 2002 forecasts as made no difference, which will no doubt encourage the Minister to dismiss the doubters who had predicted a large shortfall.
Just three months ago, even the Department of Finance had anticipated an Exchequer borrowing requirement of €750 million for the year. So what happened to change this into a €95 million Exchequer surplus?
A number of factors converged towards the end of the year. On the revenue side, there was a pick-up in income tax receipts when the self-assessment returns were filed in November. Income tax receipts still fell by 3 per cent last year, compared to a budgeted rise on 1.1 per cent, but the likely fall had looked larger. A strong Central Bank surplus and a higher National Lottery surplus also chipped in.
Meanwhile on the spending side of the Exchequer balance sheet there were also some late savings. The biggest single contributor was a few euro in the Minister's Christmas stocking from his "Auntie Mae" - the National Treasury Management Agency. It saved €317 million from its budgeted debt payment levels. There were also savings of some €370 million from lower than expected contributions to the EU budget.
The final piece of the budgetary jigsaw came with late savings in day-to-day spending in nine Government departments of some €460 million.
The main saving was €150 million from a provision for public pay benchmarking, not now due to commence until this year. Smaller savings were achieved in a range of other departments, which more than offset €350 million in overspending to which the Department of Health contributed €180 million.
To what extent these late savings were due to the spending "adjustments" announced in mid-year and to what extent spending was pushed forward to 2003 is not clear. However, the Minister and his officials will be pleased that after running 20 per cent plus over 2001 levels late in the year, spending growth returned to its budgeted rise of 14.3 per cent by end year.
Standing back from the detail of the figures, Department of Finance officials pointed out that - given the overall size of the Budget involving revenues and spending each totalling around €40 billion - the Exchequer finances came in remarkably close to expectations.
The only significant deviation was the shortfall in income and corporation tax, both explained to a large extent by unexpectedly weak growth.
Officials are also no doubt relieved that the gaping hole in tax revenues evident earlier in the year, which had lead to questioning about the Department's forecasting methods, looked a good deal smaller by the end of the year.
That said, the task for 2003 is a daunting one and is largely unaffected by yesterday's figures. Growth in public spending is targeted to slow to 6.2 per cent and this will be difficult to achieve while still maintaining public services.
The likely rise in public pay - a very significant part of the current pay bill - also remains unclear. And weak growth could yet undermine tax revenues, even though Budget forecasts in these areas remain conservative. Having seen out 2002, the Minister and his department will realise that it isn't going to get any easier.
