Exchequer in the black with €704m surplus
THE country took in more money than it spent in January, as workers paid more income tax and the State cashed in a stake in Bank of Ireland.
The Exchequer figures swung to a €704m surplus in January compared to a deficit of €394m in the same month last year, the Department of Finance said last night.
In an unusual break with tradition, Finance Minister Michael Noonan hailed the figures ahead of publication. He said the tax take was a little better than expected in January.
"The first month's Exchequer figures . . . will show taxes are coming in as expected on the Budget and even a little bit better," Mr Noonan said.
"I would expect that this would be the year that the economy turns," he told Newstalk radio.
Finance ministers don't normally discuss data such as the Exchequer figures ahead of publication in case their comments give an unfair advantage to some investors.
The main reason for the improvement was a €1.1bn profit from the sale of bonds used to bail out Bank of Ireland to international investors.
While the sale netted the Government €1bn in January, it will rob the State of a steady income from the bonds in future.
The surplus was also helped by a 10pc hike in income tax receipts which may have risen thanks to improvements in the labour market, the Department of Finance said last night. Excise duties from alcohol and cigarettes also jumped 10pc.
Receipts from VAT inched up a disappointing 1pc – well below the amount the Government wants for the year.
"Although it is hard to read too much into one month's figures, the Exchequer returns for January are likely to have been well received in official circles, particularly in relation to the income tax side," said Merrion Stockbroker's Alan McQuaid.
Spending also rose, jumping 4.1pc in January compared to the same month last year.
However the Department of Finance said most of the increase was due to extra social welfare payments – because of the way social welfare pay days fell in January.
That rise will probably be smoothed out by declines later in the year, depending how the calendar falls. It is because Thursdays are a major pay-out day for welfare schemes.
One-parent family allowances, back-to-education allowances and family income supplements are all paid on Thursdays.
And there were five Thursdays last month compared to four Thursdays in the same month last year. Still, the 18pc hike in spending at social protection was by far the biggest increase in January. Health spending inched up just 1.8pc in the same period.
Economists were disappointed by the small increase in VAT returns, which are a sign that spending over the Christmas period was lower than many had initially expected.
January is generally the biggest month of the year for VAT receipts, as retailers pay the tax from the busy pre-Christmas trading period.