A surge in spending as more than a million workers were forced on to welfare payments by the pandemic lockdown saw Government finances plunge deep into the red in April and the Exchequer recorded a deficit of €7.47bn.
The deficit was €4.28bn more than that recorded in April of last year and the Department of Finance warned that the budget position would deteriorate even faster in coming months as the shock from the lockdowns and the cliff edge in consumer spending rippled through the economy.
“In particular, April is a non-VAT due month which means that the scale of the shock to VAT receipts will likely only be apparent in May’s returns,” the Department said.
On the spending side of the equation, the surge in jobs claims and additional health spending helped push expenditure in the year to April up by €3.82bn from the same period last year at €20bn, largely driven by a rise of 23.5pc in current spending.
“The rise in expenditure primarily reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in relation to the Department of Health and the Department of Employment Affairs and Social Protection,” the Department of Finance said.
With the economy set to contract by more than 10pc this year which will slash Government revenues at the same time as it has to pay out more in benefits and is stepping for business, the budget deficit is expected to hit €23bn by the end of 2020.
The State went into harsh lockdown on March 24 and that has now been extended to May 18 with the Government estimating that the cost the wage support and unemployment measures alone at €4bn-€4.5bn over a twelve week period.
Additional spending on health is put at €2bn.
Tax revenues fell by €223m in the month of April to €2.5bn but the impact of strong growth before the lockdowns took effect meant they shrank by just €86m to €15.49bn in the first four months of this year.
Before the pandemic hit, the Government had been on track to record a third successive annual budget surplus, but the harsh blow from the business closures and mass job losses means that State revenues will fall dramatically.
Total taxation revenue is projected by the Department of Finance to decline by 16.4 per cent this year to €49.6bn, which would push it back to below 2017 levels.
Amid the otherwise gloomy data, corporation tax receipts remained buoyant and were up €435m million on a cumulative basis, primarily due to payments from large companies.
“It is still too early in the year for an effect of the Covid-19 pandemic on corporation tax receipts to be identified,” the Department said.
Eight out of every ten euros in corporation taxes here is paid by large, usually American, multinationals and companies like Facebook and Apple both saw revenues rise in their second quarter results and so this income stream for the Government is likely to be more robust than others.