Finance Department outlines estimates of receipts and expenditure for 2013

Saturday 01 December 2012 22.18
Next year's Budget deficit is expected to be ahead of target
Next year's Budget deficit is expected to be ahead of target

The Department of Finance has published its estimates of receipts and expenditure for 2013, in advance of the Budget.

The white paper shows an expected year-end tax position €210m below target, mainly due to weaker than expected returns from the self-employed.

However, the Budget deficit is still expected to be ahead of target at 8.2% of GDP.

That is comfortably inside the 8.6% target set by the Troika, but still the highest in the euro area.

Without spending cuts and tax rises in the Budget, additional spending would see the deficit rise to 8.9% next year.

Spending cuts and tax rises of €3.5bn will be required in Wednesday's Budget.

Excise duty receipts are now projected as coming in around €200m below target, but this is counterbalanced by VAT returns coming in ahead of target by €195m.

Stamp duty is set to exceed target by €65m, but income tax is projected to be €260m below target because of the lower than expected returns from the self-employed.

CSO data released on Thursday indicated 12,000 jobs had been lost in the self-employed sector in the year to October.

The estimates also show a big increase in debt service costs programmed for next year, rising from €6.47bn this year to €8.11bn in 2013.

This is mostly due to the impact of the promissory note; the agreement to repay a loan of €31bn from the Central Bank that was used to cover losses at Anglo Irish Bank and Irish Nationwide building society.

It is supposed to be repaid over ten years in instalments of €3.1bn.

The Government did not make a cash payment this year, but the estimates assume a €3.1 billion payment in March 2013.

This highlights the urgency for the Government in trying to negotiate an alternative arrangement with the European Central Bank to refinance the promissory note over a longer period.

This would ease the Government’s cash flow needs, and improve its deficit position.

The estimates also highlight the continuing cost of other aspects of the bailout of the banking sector, which amounted to just over €2bn in 2012, comprising €250m for credit unions, €456m for Quinn Insurance, €1.3bn to buy Irish Life, and €25m in promissory note costs.

For 2013 the ban-related costs are €3.1 billion for the promissory note and €272m for Quinn Insurance.

In both 2012 and 2013 the State is making a payment of €512m to the ESM, the European bailout fund that was set up earlier this year.

The payments are part of Ireland’s contribution to the €500bn fund.

All of the figures for 2013 are on a technical pre-Budget basis, and do not take account of any new policy measures that may be announced on Wednesday.

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