Exchequer deficit set to exceed €11.5 billion in 2008

More cuts in public spending are on the way following a sharp deterioration in the tax revenues collected by the Government in November, according to exchequer returns data published this afternoon.

Minister for Finance Brian Lenihan said the latest tax returns, which included a €3 billion shortfall for the month of November alone, were "poor" and reflected the severity of an accelerating economic slowdown.

"There is now a major gap between spending levels and tax receipts," the Minister said in a statement.

The Department of Finance now expects that the overall exchequer deficit for 2008 to exceed €11.5 billion, the revised deficit forecast in October, while tax receipts are likely to fall short of start-of-year expectations by far more than the €6.5 billion predicted in July.

The Minister said it was now "inevitable" that the current budget deficit of €4.7 billion forecast for 2009 would now be higher given the developments in the last two months.

"It is essential that further measures are identified to ensure the sustainability of the public finances. My key priority is to ensure that the public finances are brought under control," Mr Lenihan said.

"Given the measures I have already taken on taxes, the remedial steps to deal with this further deterioration in the public finances will focus on reducing spending."

The exchequer returns show that the shortfall in expected tax receipts in November dropped steeply in what is a critical month for the collection in tax.

The end-of-year position is now likely to be much worse than the estimates made by the Department of Finance when it announced its first tranche of spending cuts in July.

The state of public finances has also worsened since Mr Lenihan introduced the income tax levy and other tax measures in the Budget on October 14th.

Spending is running behind the profile published at the start of the year to the tune of €540 million as a result of the changed economic circumstances.

But tax revenues collected by the Government for the first 11 months of 2008 are now 16 per cent behind projections made at the start of the year, according to the data. They were running 12 per cent behind target at the end of October.

November is the most important month of the year for tax receipts, with around 20 per cent of the total tax for the year collected during the month. But it emerged today that both corporation and capital gains tax were €1 billion lower than expected for the month of November alone.

For the year to date, VAT is down €2.1 billion behind expectations, capital gains tax is €1.7 billion and corporation tax €1.5 billion lower than expected, while stamp duty has fallen €1 billion short of target.

All other categories of tax, including income tax, are behind target.

The total tax collected during the month was almost €7.4 billion, taking the haul for the year-to-date to €38.8 billion.

But this is still €7.4 billion lower than the €46.2 billion in tax that had been expected by the Department of Finance at the start of the year.

Fine Gael finance spokesman Richard Bruton said the calamitous November exchequer figures confirms that the rushed October Budget by the Government has made a bad economic situation much worse.

Labour Party finance spokeswoman Joan Burton described the overall exchequer position, which has swung by almost €9.5 billion in the space of a year, as "ruinous" and said Mr Lenihan's Budget day forecasts had been "hopelessly optimistic".

Employers' group Ibec called on the Government to revisit the current expenditure estimates for 2009 and make further reductions in expenditure, which take on board the deterioration in the position of Government finances.