Exchequer deficit stood at €18.7 billion in December

The Exchequer deficit stood at €18.7 billion at the end of 2010, as higher than expected revenues from corporation tax led to the Government exceeding its target on tax collection for the year.

Tax receipts for the year arrived at €31.7 billion, some €703 million ahead of projections, the latest data from the Department of Finance shows. A large surge in corporation tax receipts at the end of the year as a result of a recovery in the exporting sector meant this category of tax came in ahead of expectations by €764 million or 24 per cent.

Total Government spending was down 1.5 per cent compared to 2009 at €46.4 billion.

The Exchequer deficit of ¤18.7 billion compares to a deficit of €24.6 billion at the end of 2009.

Michael McGrath, an assistant secretary at the Department of Finance, said various "plusses and minuses" had led to the year-on-year reduction in the deficit.

A large part of the improvement is due to the fact that payments of €3 billion to the National Pensions Reserve Fund (NPRF) and ¤4 billion to Anglo Irish Bank made in 2009 were not repeated last year.

Total net voted expenditure was also €0.7 billion lower in 2010 than the previous year, while non-tax revenue rose €1.9 billion.

However, a year-on-year decline in tax revenue of €1.3 billion or 3.9 per cent, a €1.6 billion rise in the cost of servicing the national debt and an €800,000 injection into EBS, Irish Nationwide Building Society and the National Asset Management Agency (Nama) served to drag down the deficit.

In a statement, Minister for Finance Brian Lenihan said the figures provided further evidence that the public finances were stabilising.

"It is to be welcomed that three of our big four tax heads - VAT, excise duties and corporation tax - performed above expectations."

However, receipts from income tax - the largest category of tax - did not enjoy the same fortunes, sliding 2.2 per cent or €254 million behind target and finishing down 4.7 per cent compared to 2009.

Mr Lenihan said it was "encouraging" that the pattern of weakness in income taxes that developed in the early part of the year had not worsened and that receipts had "rallied somewhat" in the latter months of the year.

The Department of Finance expects receipts from income tax to be flat this year, once the effects of Budget 2011 measures are stripped out. This reflects the belief that the labour market will continue to be weak in the year ahead without seeing fresh spikes in unemployment.

Fine Gael finance spokesman Michael Noonan pointed to "a tale of two Irelands" in the figures, which he said showed "a deeply divided economy, with the multinational sector recovering but families facing even more hardship".

Labour finance spokeswoman Joan Burton said it was clear that the "real economy" of working and spending had taken "a savage hit" and that a broader-based recovery in the domestic economy was necessary for self-sustaining jobs growth and the return of consumer confidence.

The lower than expected income tax receipts was echoed in a shortfall in health levy and PRSI receipts, which meant that net current or day-to-day spending at the Department of Health and the Department of Social Protection ran ahead of projections.

Total current expenditure across all departments was up 0.6 per cent year-on-year and came in €231 million or 0.6 per cent ahead of targets at €40.5 billion, while capital spending of €5.9 billion for the year fell short of its target by €82 million or 1.4 per cent. Capital spending was down 14.3 per cent year-on-year.

The data also shows that the Government gave Nama seed capital of €250 million during the year, which was repaid by the agency and did not affect the Exchequer position.

This is in addition to the €49 million used by the Government to buy shares in the Nama special purpose vehicle, a sum which has been reclassified in the Exchequer statement as a loan.