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Public finances continue to improve as deficit narrows to €4.9 billion

Finance Minister Paschal Donohoe said the strong tax returns show the “strength of our economic recovery”.

Finance Minister Paschal Donohoe
Finance Minister Paschal Donohoe
Image: Julien Behal via RollingNews.ie

PUBLIC FINANCES ARE continuing to improve, with the deficit to the exchequer narrowing to €4.9 billion at the end of November.

That compares with a 12-month rolling deficit that stood at €7.4 billion at the end of October.

The reopening of society, higher employment and VAT returns, and a strong corporate tax take have been credited for the reduction.

Total tax revenues last month were €11.3 billion, which Finance Minister Paschal Donohoe said was a sign of the “strength of our economic recovery”.

He added: “VAT receipts, in particular, reflect the significant rebound in consumer spending, while the income tax performance reflects the ongoing recovery in the labour market.

“Indeed, figures published last week show that the level of employment is now back at pre-pandemic levels, though this varies across sectors.

“Corporation tax receipts in November were very strong, reflective of a very robust performance of many higher-technology sectors during the pandemic.”

Corporate tax revenue amounted to over €4 billion in November, an increase of 31% on the same period last year.

The VAT take was €2.6 billion, almost 25% higher than the same period in 2020.

Despite the positive performance, Donohoe cautioned that there were many fiscal challenges ahead, “including the challenges now posed by the Omicron variant”.

“This is why, once the pandemic has passed, we must realign public revenue and expenditure while continuing to invest in public services, particularly in capital infrastructure,” he added.

Government spending to the end of November amounted to €74.7 billion, €1.2 billion or 1.7% ahead on the same period in 2020.

Labour spokesperson on finance Ged Nash has welcomed the November Exchequer returns, however, he claimed that there was an issue about forecasting being so far off the mark and that it mitigated against proper planning and resource use. 

“It is obviously a welcome development to see the public finances running ahead of forecast to this extent,” Nash said. 

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“Nonetheless, the position is far from satisfactory. Forecast divergence of this magnitude makes it difficult to plan the provision of public services, particularly on a multi-annual basis. This is not a sustainable position and it needs to be explained,” he said. 

“I don’t underestimate the challenges involved in forecasting against the backdrop of the pace of change in the public finances over the last decade, compounded recently by the massive disruption caused by the pandemic,” he added. 

“I am conscious too that while forecasting is primarily the preserve of the Department of Finance, both the Departments of Public Expenditure and Reform and the Fiscal Advisory Council also have contributory roles,” Nash said. 

“A constructive discussion of the issues, methodologies and challenges involved at the relevant Oireachtas Committee with contributions from both Ministers and their relevant officials would be useful at this stage.”

With reporting by Hayley Halpin

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