Friday, May 6, 2011

The Exchequer Balance

Here are the cumulative monthly Exchequer Balances from 2007 to 2011.  The running deficit of €9.9 billion this year is the worst yet!

Exchequer Balance 2011

The Information Note from the Department tells us that everything is ok because this is in line with expectations.

The Exchequer deficit at end-April 2011 was €9.9 billion compared to a deficit of just under €7 billion in the first four months of 2010 and was in line with Department of Finance expectations. The Department will continue to monitor the emerging data closely and will present a view on the likely outturn for the year as a whole at the mid-year Exchequer Returns Press Conference in early July.

The year-on-year increase in the deficit of just under €3 billion was primarily due to the €3,060 million in non-voted capital expenditure payments to Anglo Irish Bank and INBS in March which relate to the first instalment of the Promissory Notes committed to these institutions in 2010.

Ah, it’s all Anglo’s fault!  If we just look at the Current Account Balance we can get a picture of the day-to-day accounts of the government.  We have already looked at the revenue side and saw that the story was not as rosy as it was made out to be.  It’s a bit of a waste of time looking at the expenditure figures in the Exchequer Account because of the nonsense that is “net voted expenditure”.  Anyway here are the current accounts balances going back to 2007.

Current Account Balance

This is much better. Things are only equally as bad as they were last year!  We must be due to turn that corner soon.  Not quite.  Although looking at the current balance does net out the effects of “appropriations in aid” and “net voted expenditure” it can’t account for things that are left out of the Exchequer Account altogether.

Here are the Debt Interest costs incurred over the past four years.

Cumulative Interest

For a country accumulating debt at the rate we are it is remarkable that the 2011 interest cost is so close to the 2010 cost.  What is even more remarkable is how low the interest bill was in the first two months of the year – practically zero.  We were paying interest during this time but not from the Exchequer Account.  Again the Information Note provides the answer.

Total debt servicing expenditure in the first four months of the year, including funds used from the Capital Services Redemption Account (CSRA) – which do not impact the Exchequer – was €2.7 billion. Adjusting for the sinking fund payment which had been made by end-April in 2010 but which has not yet been made in 2011, debt servicing costs in the first four months of 2010 were just over €1.8 billion. The large year-on-year increase in debt servicing expenditure reflects the cost of servicing a higher debt burden.

If the true debt interest costs were included in the Exchequer Account then the Current Account Balance would not be close to last year’s level it would be about €0.7 billion worse!


  1. Looks like government spending is not coming down down despite all the "cuts".

    The 2011 blue line in your first graph says it all. Scary.
    This is a another bubble that will have to burst.

  2. Hi Tumbrel,

    That is my view as well. A lot of these "adjustments" do not actually change the amount of expenditure.

    €1 billion of the programme of adjustments we have gone through comes from the postponement of NWA public pay increases. In the first year the pay bill is €x billion. In the second year the pay bill is €x billion yet we are supposed to had a cut. Cuts do not equal savings is a well worn phrase and is appropriate here, except for slightly different reasons.

    I think the blue line for 2011 will move back towards the 2010 line but it is clear that we are not making any progress in closing the deficit after three year's of adjustments. If today's pronouncements are to be followed we should be aiming to close the deficit overnight. Not a chance.