Thursday, June 3, 2010

Exchequer Balance Improves (sort of)

After showing some improvement in April compared to 2009, the Exchequer Balance for May shows shows an even bigger ‘improvement’.  By this time last year, the Exchequer was in the red to the tune of €10.6 billion. Twelve months on and the deficit is ‘only’ €7.9 billion.
Exchequer Balance to May
However this improvement is only technical.  We frontloaded our 2010 contribution to the National Pension Reserve Fund to May 2009 to fund the recapitalisation of AIB and BOI.  This is €3 billion in capital expenditure that accounts for the difference. If this item is spread over the two years, as it would have been, this apparent improvement in the Exchequer Balance disappears.
If we look at the Exchequer Current Account we see that the deficit is actually worse!
Cumulative Current Account Balances to May
By this time last year Current Spending had exceeded Current Revenue by €6.4 billion.  The equivalent deficit this year is €7.2 billion.  The Current Deficit is €800 million or 11% worse this year.  And that is after the measures adopted in last April’s Supplemental Budget and December’s 2010 Budget.
Last May there was a monthly current deficit of €18 million.  This year the monthly deficit was €310 million – an increase of 1,622%.  Most of this deterioration is down to the €319 million fall in monthly tax revenues.  Voted Current Expenditure in May last year was €3,327 million.  This year it was €3,259 million, a reduction of €68 million or 2%.  Not much austerity on view here.
Although expenditure in most areas in down slightly, Social Welfare Expenditure continues to rise.  So far this year the Exchequer has spent about half a billion more on social welfare, than by the same time last year.  This excludes the expenditure on social welfare that is financed by PRSI contributions paid into the Social Insurance Fund.

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