Brendan Keenan: New figures show just how bad our situation is
Published 03/12/2011 | 05:00
FIXING the public finances is often compared to a marathon. In truth, it is more like the 10K walk, where the athletes have to go as fast as they can while severely constrained in the way they can move.
The two documents from the Department of Finance yesterday demonstrate how frustrating the process is.
The main one is the estimates of tax revenues and spending this year, and the forecast for next year. Before the bailout, we did not know what the targets would be, so the estimates were an opportunity for lots of clever guesswork. In the good times, the point was to guess how much the Finance Minister would put back in our pockets!
No chance of that now, but we also know the targets. The key target is the finances of the entire public sector as a percentage of the economy's output -- its gross domestic product (GDP).
Finance forecasts say this has stopped rising and will stay at 10pc of GDP next year. But the process of balancing the government books means it has to fall to 8.6pc of GDP next year. That is a reduction of €1.7bn. In order to achieve that figure, almost €4bn of tax rises and spending cuts will have to be made.
The real pressure comes from rising interest costs on the national debt and the payments of capital into the banks. The interest bill will increase by €3bn. A similar figure has to be found each year for bank capital.
The other document yesterday, the tax and spend in November, also shows the glacial pace of progress. The awesome Budget 2011 has meant taxation is up by a fifth. But it still brought in less than expected in the first 11 months, as did VAT.
And the Government will still have to borrow €17bn next year.
The political problems caused by this first full Budget from the Coalition raise dire questions about whether the triple bill of deficit, interest and bank costs can be carried all the way.