Friday, March 4, 2011

Public Finances (do not) improve

The February Exchequer Returns seemed to suggest that there was an improvement in the public finances.  RTE led their story with:

The latest Exchequer figures from the Department of Finance show a deficit of €1.945 billion up to the end of February. This compares to a deficit figure of €2.407 billion the same time last year.

This would suggest that there has been a €462 million improvement in the public finances and that the tax and expenditure measures introduced over recent budgets are bringing the deficit under control.  Not so fast! Most of the "improvement" of €462 million in the Exchequer Deficit is due to a sleight of hand by the Department of Finance.

In the first two months of 2010, the Exchequer spent €363 million on servicing the National Debt. For 2011 the figure is €104 million - some €259 million lower! With our rate of borrowing our debt servicing costs are rising not falling.

According to the DoF "the majority of the funds used to service the national debt in the early months of 2011 are coming from the Capital Services Redemption Account (CSRA) rather than the Exchequer." I had never heard of the CSRA but it strikes me as unusual that an account with Capital in the name is being used to meet Current expenditure needs.  A query by a colleague of mine to the Department yielded this response.

According to the Department’s Information Note, the full debt service cash cost for the first two months of 2011 was €626 million. This is €522 million higher than the total given in the Exchequer Account.

If we use the correct figure for debt interest we can see that the public finances didn't improve by €462 million in the year to February - they deteriorated by a further €60 million.  Oh, for a transparent system of the public accounts.

1 comment:

  1. The media reported that the USC would not make its presence felt in public accounts until the march returns!!!.

    The USC is paid over to the revenue together with PAYE/PRSI on the 14th or 21st of the following month. i.e at latest Feb 21st, except for late or non payers.
    Are we to take it that the PAYE/PRSI figures we have been looking at are also one full month in arrears?