€60bn needed to run State this year
Taoiseach's tax pledge in jeopardy as State must borrow equivalent of tax take in 2011
Taoiseach Enda Kenny's pledge not to increase income tax may already be in jeopardy as Ireland will have to borrow more than €30bn in 2011 -- which is the equivalent of the State's total tax revenues for the year, new figures from the Department of Finance reveal.
Our €18bn budget deficit combined with maturing debt means that this year the cost of keeping the lights on will be about double what the State will raise in taxes -- bringing the total cost of running the State to about €60bn.
Given the country's rocketing national debt, which will stand at €173bn by the end of 2011, there are mounting fears that next December's budget cuts of €3.6bn will not be enough.
It has also been suggested that the State will be forced to seek more time from Europe to bring our deficit down.
And given other pledges not to cut social welfare or public sector pay before 2014, there are now growing fears over the public finances.
FF's public expenditure and reform spokesman Michael McGrath said there was now considerable doubt over the Government's promises not to cut pay or increase taxes. "Given their commitment on not cutting social welfare, or public sector wages and now the commitment not to increase income taxes, it is very difficult to see where they will find the needed cuts. Remember the €3.6bn figure is a minimum," he said.
Last Thursday, marking his Government's first 100 days in office, Mr Kenny committed to no increases in income tax, but the country's worsening financial state may force him into a U-turn.
"As head of the Government, I can say this in respect of the Programme for Government and this is very clear: there will not be any income tax increases in the Budget," Mr Kenny said.
However, his Finance Minister, Michael Noonan, said two weeks ago that he could not definitively rule out any such increases in personal taxation.
Last night, a spokesman for Mr Noonan said the €30bn was factored in and the €3.6bn cuts target stands.
On Budget Day last December, the department said the combined deficit for the years 2011 to 2013 was about €43bn.
But new documentation reveals the department now thinks that figure will be €48.5bn, about €5bn higher.
According to a department spokesman, the higher cost was as a result of slower than anticipated growth and interest payments.
At that stage, it was estimated that the Government's funding shortfall for 2011 would be €22.9bn, but that figure has since increased by more than €7bn.
However, now the figures are significantly higher, with a total funding requirement of €75.5bn until the end of 2013.
"In terms of our funding requirements for the individual years, factoring in Exchequer deficits and maturing debt, the State will require approximately €30bn, €23bn and €22.5bn in each of the years 2011, 2012 and 2013 respectively," the department said.
Maturing government debt, both long-term and short-term, over the same period amounts to some €27bn, including an assumption for some short-term debt funding.
The new figures emerged amid questions over when exactly the country will be able to return to the markets.
According to the Department of Finance, we have enough funding to get us through until the second half of 2013, but not until the end of the year, as had been suggested by several members.
Mr McGrath said that by his estimation, Ireland would need €14bn before the end of 2013 and has called on the Government to give clarity on the issue.
"It seems clear that the State will, despite the assurances from the Taoiseach and Minister for Finance, require additional funding by the mid-point of 2013 at the latest.
"We need absolute clarity on this issue. The facts simply do not bear out the assertion... that Ireland is funded through to the beginning of 2014," McGrath said.