THE GOVERNMENT is estimating an exchequer deficit of almost €15 billion next year before next Tuesday's budgetary changes are taken into account, according to the Estimates of Receipts and Expenditure for 2009 published today.
The figures show that the General Government Balance, the figure used by the EU to measure compliance with the rules of the single currency, will be in deficit to the tune of €13.3 billion or 7 per cent of GDP. That is more than double the EU guideline of 3 per cent. The figures state the position in advance of budget announcements about spending cuts or tax increases which will be unveiled on Tuesday by Minister for Finance Brian Lenihan.
Tax revenue is expected to fall under most headings next year with a total tax take of €41.2 billion by comparison with €42.4 billion this year. Only income tax is expected to rise and that is by a very modest €200 million. Falls are expected in VAT, corporation tax, capital acquisitions tax, capital gains tax and stamp duties.
The Estimates forecast a significant cutback in the Government's capital spending programme with a cut from €8.5 billion this year to €7.8 billion in 2009. The most significant reduction is in transport infrastructure, which is expected to come down by almost €200 million to €2.5 billion. The Office of Public Works faces a reduction of over €80 million due to the winding down of the decentralisation programme.
The Opposition parties said the Government had to take most of the responsibility for the state of the public finances. Fine Gael finance spokesman Richard Bruton said the figures showed the appalling turnaround that had taken place in the public finances. As recently as 2006 there was a budget surplus of €5.2 billion and now the Government was forecasting a deficit of over €13 billion for next year.
"This appalling €18.5 billion turnaround is due to an unsustainable growth bubble which generated revenues that couldn't last. The tragedy is that no value for money reforms were introduced during the period," said Mr Bruton. "Ireland now faces a very tough budget. The Government must avoid making matters worse by slashing investment or raising taxes, while focusing on long overdue reforms to stamp out waste, to rationalise an overblown administrative structure and to protect frontline services. Vulnerable sections of our community must not become the fall guy for years of Fianna Fáil's complacent management of public money," he added.
Labour Party finance spokeswoman Joan Burton said the figures confirmed the full cost of "Cowenomics" to the Irish people and she also pointed to the remarkable deterioration in the country's economic situation in just 12 months. "The fall in the fortunes of the Irish economy as reflected in these figures is the most rapid and severe in the history of the state. In 1997 Fianna Fáil inherited a modest budget surplus. When the leave office they are likely to leave behind the biggest deficit every seen," said Ms Burton.
"While the good times rolled, this Government never ceased congratulating themselves on their economic prowess. Now that they have finally admitted that the country is in a recession, suddenly it is everybody else's fault but their own," she added.
Ms Burton accepted that the recession had been made worse by the international credit crunch, but she insisted: "Ireland is suffering hard and deep because our recession has its origin firmly in the house price bubble which Fianna Fáil stoked, mishandled and refused to dampen. It is no accident that Ireland is the first of the eurozone economies to go into recession."
There was intense speculation yesterday about how Mr Lenihan will deal with the crisis with some of his party expecting to see an income levy as part of the budget package.
© 2008 The Irish Times