Glimmer of hope in Exchequer figures
NEVER prophesy, especially about the future. No sooner had the Department of Finance reduced its forecast for growth in the economy this year than the tax revenues for April suggest it might have spoken too soon.
The mandarins of Merrion Street would be delighted to be proved wrong on this one. Nobody is going to make too much of one month's figures, but officials were pleasantly surprised by the underlying strength of tax revenues last month, especially the critical one of income tax.
It is critical, not only because it is the major source of government revenue, but because it is an early, if rough, guide to employment and incomes.
Last month's figures were boosted by bank payments of DIRT tax on savings, but even allowing for this, income taxes seem to be more than €60m better than expected.
There are always two figures in the Exchequer returns -- what actually happened, and what was expected. The penal nature of last year's Budget is seen in the fact that we are paying 20pc more income tax than last year, thanks to cuts in credits and the arrival of the new social charge. The fact that this is more than expected creates at least the hope that the Budget has not had as depressing an effect as it might have done.
There was a good showing by VAT as well. It is still 3pc lower than expected at Budget time last December, but that is a sharp improvement on the 5pc shortfall in VAT and income tax at the end of March. That shortfall will have been one reason behind the downgrade to the economic forecast.
The irony is that the revenue target which was beaten in April was based on the original 1.7pc growth forecast. Had it been the revised 0.7pc growth, revenues would be significantly ahead of target. It is early days, but any continuation of the trend could see the Government coming close to the original Budget target for borrowing of €17.7bn.
That would be a saving of €500m on the revised estimate, which is still real money, but the effects could go far beyond that.
Finance Minister Michael Noonan had an unmistakably jaunty air commending these figures to the Dail. He knows that any growth beyond one per cent this year would lend weight to the official forecasts of a noticeable recovery from next year, and could begin the slow process of restoring confidence in the country's prospects.
We shall have to wait and see, but at least there is something to wait for.