IT IS certain that the Minister for Finance, Brian Lenihan, was over the moon when he was appointed to such a senior position by the Taoiseach back in May.
The elation must surely have worn off by now. The exchequer returns released yesterday confirm, not that his fiscal situation is as bad as was feared, but that it is even worse.
The returns, for the nine months to September 30th, reveal an exchequer deficit of €9.4 billion. The tax take is well below that forecast not just in stamp duties (because of the property downturn), but also in VAT and capital gains tax. Consumers, for so long a driving force of the economy, have been spooked by rising prices and the fear of worse to come and have tightened their belts. At the same time, the Government continues to let spending rip, running at 10.1 per cent above last year's level. This pincer movement acting against the Government finances could deteriorate even further before the year is out.
Part of the increase in spending is down to the surge in unemployment. The total number of claimants now stands at 240,217, an increase of 80,000 in the last 12 months and higher than at any time in the last 10 years. Nobody is suggesting that unemployment - and the cost of funding it - has peaked. The Government yesterday was quick to point to "our educated and young workforce, our low debt ratio and our low tax environment". But accentuating the positive is not going to restore the State's finances or get the economy back on track. Mr Lenihan says the Government is continuing to take action to deal with "the challenging economic situation". Well he would say that but, in truth, there is precious little sign of action.
Mr Lenihan has got 11 days in which to finalise his first budget. It is reasonable to assume that the Taoiseach, whose own forecasts and estimates have gone so abysmally askew, will be burning the midnight oil with him. However they frame the budget, though, a substantial increase in borrowing and in the State's indebtedness is now certain. This will be borrowing, not just for long-term capital expenditure which is always appropriate, but just to fund day-to-day expenditure. Ireland is the first euro zone member to slide into official recession and we will breach, in some style, the 3 per cent limit on budget deficits agreed in the Stability and Growth Pact rules. From the euro zone's golden boy to worst behaved in just 18 months, we cannot put the blame on external factors.
Mr Lenihan, sensibly, would not get drawn yesterday on his preferences for budget measures. But the reality is that he has no easy options. He will have to obtain a significant increase in tax revenues but, in so doing, be careful not to push the economy into deeper recession. There will have to be widespread cutbacks in spending but they must be executed in a manner which indisputably shelters the poorest in society. Recent increases in the price of fuel and basic foods have hit hard against those on low incomes. No matter how strapped Mr Lenihan is, they must be protected.