Interest payments alone 'to cost 20pc of tax take'
Published 06/01/2010 | 05:00
THE annual cost of paying interest on the national debt is set to exceed €7bn within the next five years.
According to the Department of Finance, this would mean that 20pc of taxes will be going to service the debt -- or €1 of every €5 taken in.
Due to the economic crisis, the national debt has spiralled from €25bn in 2007 to €50bn in 2008 and €75bn last year.
The cost of servicing the interest payments on this enormous debt has already increased from €1bn to €2.5bn in the space of one year.
And it is due to increase further to around €7.75bn in 2014, when the national debt is set to top €148bn.
This came as the opposition warned that figures showed the economy was in the grip of one of the worst recessions of the industrialised economies since the Second World War.
After the publication of the figures revealing the state of the public finances last year, Finance Minister Brian Lenihan expressed concern about the cost of servicing the national debt.
"This is clear evidence of the need to take action to achieve long-term sustainability of the public finances," he said.
But the projected rise in the national debt takes full account of billions of euro in planned cutbacks in the next Budget.
It does not include the €54bn cost of the National Asset Management Agency (NAMA) plan to acquire toxic property loans from the banks with taxpayers' money.
The Exchequer returns for 2009 showed that there was a €24.6bn deficit in the public finances, though this was slightly better than forecast in last month's Budget.
This was mainly due to a rise in capital gains tax after the moving back of a deadline for payment.
There was also a rise in takings of excise duty on alcohol and tobacco, as consumers bought more to avoid possible excise hikes that never came.
But tax returns for the year were almost back to 2003 levels at just over €33bn.
There was a sharp fall in income tax and VAT receipts over the summer months last year as the recession continued.
Government spending was slashed by 4.4pc to €47bn. In his statement, Mr Lenihan said he believed the Exchequer returns showed that the Government's plan to manage the public finances was working.
"As I said, economic growth will return during the course of this year and this will assist in the ongoing improvement of the public finances," he said.
But Fine Gael finance spokesman Richard Bruton said the figures showed the Irish economy had markedly deteriorated in the last 12 months.
"The Government's ill-thought out responses did nothing to limit the damage," he said.
Mr Bruton said there was a need for radical reform of public services because the one-off measures of €6bn in new taxes, €2bn in public sector pay cuts and €4.5bn in capital spending cuts could not be repeated.
"The Government cannot keep going back to the same easy sources to find savings," he said.
Labour finance spokeswoman Joan Burton said the "poor returns" highlighted the absence of a coherent jobs strategy. "Rather than put in place a strategy to boost employment and growth, the Government continues to wait for the international economy to recover," she said.