merrion street

The following statement on the end-December 2011 Exchequer Returns was issued today (Wednesday, 4th January 2012) by the Minister for Finance, Mr. Michael Noonan, T.D. and the Minister for Public Expenditure and Reform, Mr. Brendan Howlin, T.D.

Commenting on the Returns, both Minister Noonan and Minister Howlin stated:

“We enter 2012 with our finances under control and this further underpins the credibility of our 2012 budgetary forecasts. The Exchequer deficit in 2011 was some €2¾ billion lower than it was 2010, when the impact of banking related expenditure is excluded. This shows that we are making progress in returning our public finances to a more sustainable path. The 2011 figures are slightly ahead of estimates included in Budget 2012 and we have met our budgetary targets set as part of the EU/IMF Programme for 2011”

Minister Noonan stated “The tax receipts published today are broadly in line with the estimates for 2011 set out in the  Budget in December and highlight the robustness and credibility of our 2012 tax revenue forecasts After three years of falling receipts, tax revenues in 2011 grew by over 7 per cent. This is to be welcomed although we cannot lose sight of the fact that tax revenues were somewhat less than originally planned. Tax revenues weakened somewhat in the second half of the year but this is not surprising given the more difficult economic conditions prevailing since the summer. Nonetheless there were some positive aspects to the tax revenue performance in 2011 and I am confident that the 2012 tax forecasts will be delivered”.

Commenting on voted expenditure in 2011 Minister Howlin stated;

“Voted expenditure was well within the limits set out for the year as a whole, demonstrating the effective management of public expenditure which characterised 2011. It is clear that we are reducing expenditure, as we must, and the Government will strive to ensure continuing tight control over expenditure in the coming years. The budgetary reforms introduced in December, including the new Medium Term Expenditure Framework, will further assist in better budgetary planning and management of resources for the coming years.”

Notes for Editors

Tax Revenue

·         Tax revenues in 2011, at €34 billion were €2.3 billion (7.2%) higher than in 2010. This year-on-year increase is due primarily to income tax growth of 22% – as a result of measures introduced in Budget 2011, most notably the USC – but also to growth in stamp duty revenues of 45%. This resulted from the temporary levy on Pension Funds, introduced to fund the Jobs Initiative.

·         Tax revenues were €873 million (2.5%) below the original Budget 2011 target of €34.9 billion and were a little lower than the outturn as estimated in Budget 2012 in December.

·         However, some €261 million in corporation tax receipts due for receipt in December were not received into the Exchequer account in time to be accounted for in 2011. The bulk of these receipts have since been received and will form part of the January 2012 tax revenue outturn.

·         When account is taken of this, tax revenues were €612m (1.8%) below profile and are in fact slightly ahead of the outturn as estimated in Budget 2012.

·         This enhances the credibility and robustness of our 2012 tax forecasts.

                  Voted Expenditure

·         Total net voted expenditure in 2011, at €45.7 billion, was €724 million (1.6%) down year-on-year. Net voted current spending was €903 million (2.2%) whereas net voted capital expenditure was €1,626 million (27.5%) down. Adjusting for the reclassification of health levy receipts to form part of the USC, it is estimated that total net voted expenditure fell 5.7% in the year (net voted current expenditure fell 2.6% on that basis). This is evidence of the careful management of public expenditure which characterised 2011.

·         Compared to the profile published in conjunction with the July Revised Estimates Volume, total net voted expenditure was down €440 million (1%). Net voted current expenditure was €377 million (0.9%) less than planned with the main underspends on the Agriculture and Social Protection Votes of €166 million (16.5%) and €95 million (0.7%) respectively. The Agriculture underspend was due primarily to delays in the processing of some payments. The underspend on the Social Protection Vote was due to higher than expected PRSI receipts, which more than offset overspends on a number of schemes, including Jobseekers Allowance. 

·         Net voted capital expenditure was €63 million (1.4%) below target in the year, largely due to shortfalls in the expenditure of the Agriculture, HSE and Environment Votes of €67 million, €40 million and €35 million respectively. Under the long-established capital carryover provisions, €115 million will be carried forward to next year. While the capital carryover is technically shown as part of the 2011 Exchequer outturn, it will not be spent in cash terms until 2012.

Debt Servicing

·         Taking into account the funds used from the Capital Services Redemption Account (CSRA) as well as Exchequer payments, total debt service expenditure was up €1.1 billion year-on-year in 2011, at close to €5.4 billion. This reflects the burden of servicing a higher stock of debt. �

Overall Exchequer Position

·         The Exchequer deficit in 2011 was €24.9 billion compared to a deficit of €18.7 billion in 2010. The €6.2 billion increase in the deficit is due to higher non-voted capital expenditure resulting primarily from banking related payments. The majority of these payments  are once-off payments relating to the recapitalisation of the banks  and an exchequer deficit of €18.9 billion is forecast for 2012.

·          Excluding banking related payments the Exchequer deficit fell by €2¾ billion year-on-year.

EU/IMF Programme Target

·         As part of the quantitative performance criteria of the Technical Memorandum of Understanding (TMU) of the EU/IMF Programme, a target for the end-December 2011 Exchequer primary balance – that is the Exchequer balance excluding Exchequer debt interest payments – of –€15.0 billion was set.

·         Under the terms of the TMU the floor on the Exchequer primary balance is adjusted downward for payments for bank restructuring and credit union resolution funding. There was some €7.6 billion in once-off Exchequer payments related to July’s recapitalisation of the banking sector, €¼ billion in credit union funding but also €1 billion in receipts from the sale of part of the State’s shareholding in Bank of Ireland. Together, these give a “Net Bank/Credit Union Support Adjuster” of –€6.8 billion.

·         Under the terms of the TMU also, the Exchequer primary balance is further adjusted in the event of any over/under-performance in Exchequer tax revenues and PRSI receipts compared to the TMU estimate. Exchequer tax revenues and PRSI receipts amounted to a combined €41.9 billion in 2011, which was a €½ billion less than the TMU target. This is the “Revenue Adjuster”.

·         This means that the Exchequer primary balance target was adjusted further to –€22.3 billion (see table below).  The actual Exchequer primary balance in 2011 was -€21.0 billion, meaning the target set as part of the EU/IMF Programme was achieved.

·         Adherence to the target will be confirmed with Troika officials during the forthcoming review mission.

For more details see the following pdf files:

Exchequer_Final_Statement(2)

Appendix I - End-December 2011 Tax Receipts PDF

Appendix II - End-December 2011 Net Voted Expenditure PDF