Exchequer returns

The first snapshot of the Government's finances in 2008 contains little in the way of surprises

The first snapshot of the Government's finances in 2008 contains little in the way of surprises. The Exchequer returns for January show that tax revenues are slightly ahead of the Minister for Finance's forecasts while spending by Government departments is somewhat behind target.

Commentators will of course pore over the figures to try and divine what new trends are appearing but the reality is that it is far too early to draw any meaningful conclusions about the outcome for the year.

What can be said is that trends apparent going into the end of 2007 have continued. Some taxes that closely mirror economic activity, such as capital gains tax and VAT have once again disappointed reflecting growing consumer trepidation married to a general slowdown in economic activity.

Stamp duty - another bellwether tax - was slightly ahead of forecast, while income tax which is an indicator of employment, also held up. However, the stamp duty take in the first month of this year was only half of the corresponding figure last year; further proof, if any was needed, that the housing boom is over.

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Perhaps the best that can be said of yesterday's figures is that things are no worse than the Government expected at this stage, and a good deal better than some commentators predicted.

Unfortunately what cannot be said with any degree of certainty is whether the Government's economic forecast of 3 per cent growth for this year - which was reiterated by the Minister last week and in part underlies his tax forecasts - will trump the more downbeat prognosis of some market observers who are talking of growth being closer to 2 per cent.

Nobody is denying that 2008 will be a tough year, certainly by comparison with what has gone before. Quite how tough will become apparent as the months unfold, and will depend as much on what happens on the global economic stage as events at home.

Several points are worth repeating in such uncertain times. The first is that even the most gloomy of forecasts - which in truth yesterday's figures have done little to dispel - represent a good performance by international standards.

The second and related point is that even if the Government forecast is missed, the overall budgetary position for the year should fall well within the limits set by Europe under the stability and growth pact, which is arguably the best objective measure of performance.