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Wednesday, 3 September 2008

Irish Property Crash - It's time that the Government put away their golf clubs, suntan lotion and Dan Brown paperbacks and got a grip...

Exchequer faces €5bn shortfall as tax revenues drop sharply...

TAX REVENUES are continuing to plummet, according to the latest official figures, which indicate the shortfall for the year could exceed €5 billion. This is far worse than the Government was expecting as recently as two months ago.

In July, the Government projected a tax shortfall of €3 billion for the year, but a rapid slowdown in consumer spending has hit VAT receipts, while the dramatic slowdown in stamp duty and capital gains tax receipts has continued due to the property crash.

The implications of the figures will be discussed by the Cabinet today at its first meeting after the August holiday break. Substantial cuts in public spending for next year now appear inevitable and are likely to be accompanied by increases in borrowing and taxation.

The Opposition parties last night accused the Government of failing in its duty to get to grips with the crisis in the public finances during the summer and taking its traditional August holiday as if there was nothing wrong. Fine Gael deputy leader and finance spokesman Richard Bruton predicted that the tax shortfall for the year would be €6 billion, double the amount predicted by Taoiseach Brian Cowen and Brian Lenihan seven weeks ago.

"In the time the Government have been away on holidays, their July predictions for the economy and taxes have been shown to be 100 per cent off-target," he said. "It is now time that the Government put away their golf clubs, suntan lotion and Dan Brown paperbacks and got a grip on the deteriorating Irish economy," added Mr Bruton.

"This alarming swing from surplus to deficit is not due to bad luck, it is down to Brian Cowen's reckless management of the public finances over the last four years."

Labour Party finance spokeswoman Joan Burton said the figures showed a further huge black hole opening up in the Government accounts.

"Our golfing Taoiseach has truly driven the economy not just into the rough, but has played the ball off the course," she said. Ms Burton said that, so far, the Government's response to the crisis was to criticise others for "talking down the economy", while the problems had been created by the incompetent mismanagement and self-serving behaviour of the Government.

Mr Cowen faces a further challenge this week as he seeks to restart negotiations on a new national pay deal. The Taoiseach has invited employers and trade unions to talks on Friday but the two sides are showing no sign of weakening their bargaining positions. ESB workers are the latest to lodge a play claim following the recent collapse of talks. Unions representing the State electricity are seeking an 11.25 per cent pay rise over 18 months.

The unions, including Unite, Siptu and the Technical Electrical and Engineering Union (TEEU), met yesterday and agreed to lodge the €60 million claim. They are basing their claim on the fact that the cost of living has gone up 5 per cent in the last year. The ESB said last night it had yet to receive details of any claim, adding that it was aware the Government was attempting to revive the national pay talks and it supported that process.

The exchequer returns, published yesterday, show that tax revenue at the end of August was €2.8 billion lower than expected. The total tax take for the first eight months of the year at €24.7 billion was 10 per cent behind budget projections and a full 9.4 per cent lower than in the same period last year.

All tax revenues were down for the first eight months. The biggest shortfall came in VAT receipts, which were €1.177 billion below projection, 11.4 per cent below target and 6 per cent down on last year. The slowdown in the construction industry was reflected in a shortfall in stamp duty of €480 million, a 45 per cent drop on last year, and in a shortfall in capital gains tax of €436 million, 39 per cent below target.


Report by STEPHEN COLLINS and BARRY O'HALLORAN - Irish Times Newspaper

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