It's extraordinary that the Minister for Finance can glide over a hideously inaccurate budgetary forecast by saying that it's a result of prudent and far-sighted government. Yet this is how Brian Cowan explains the Exchequer returns for 2006, issued by the Department of Finance, which show that there was a surplus of €2.265 billion in 2006, which was €415 million more than the €1.85 billion surplus expected. This compares to an exchequer deficit of €499 million in 2005, and a budgeted deficit of €2.92 billion for the year - a forecasting error/undershoot of more than €5 billion. Labour's Joan Burton says that these figures "beggar belief".
We are supposed to believe that this represents clever economic management. It is anything but. It represents a serious failure of forecasting and financial management. Had the Minister gotten his sums right, he could have used part of that €5.2 billion to either reduce taxation, or to improve public services. Instead, he has 'accidentally' collected more, and spent less, than he could have. Errors of this magnitude come close to making a mockery of the entire Budget process.
The fact that so much of this surplus has come from stamp duties from property sales is bound to tempt Fine Gael and the PDs into making property tax cuts an election issue. There will be some support for this view if the comments of Senan Molony, covering the story in this morning's Indo are typical: "This means that the army of home buyers paid the Exchequer €350m more than the Department of Finance was expecting from home purchases. Those who paid it out naturally feel it is a tax on self-betterment". He adds that "politically, it remains to be seen whether the feel-good factor over exemplary national figures will be outweighed by the burning resentment of one sector over continued Government gouging in the property market".
That same piece in the Independent begins with a contrast between the plummeting national debt and the unprecedentedly high levels of personal debt. "This year, only €1 in every €20 raked in by the Government will go to service the debt, compared to one in three in 1987". Many homeowners today face decades paying off mortgages and credit card debt has reached stratospheric levels. It would be interesting to have a more in depth picture of the levels of personal indebtedness, especially what sort of people are effected in which ways
I am convinced that this breeds a great deal of insecurity and angst among the electorate and the left ought to look at ways of addressing this that go beyond short term cuts in stamp duties. Emphasis on social provision and some long term planning that the economy doesn't go belly up in a year or two when the property boom finally ends would be a better position to adopt. Sooner or later the cautious statisticians in the Department of Finance will get it right because every bubble bursts...eventually.
what about making funds like this where the intake is above expectation by such a huge degree unavailable for two years to spend?
Its extreme but with some tinkering it might get better forecasts.
Posted by: cian | January 05, 2007 at 03:34 AM