Sometimes we overlook things that are in plain sight. The economy is purring along nicely. Despite the shadow of Brexit, unemployment fell by 4,400 last month to 7.7% and there is a strong flow of new jobs. Inflation is flat, interest rates are low and tax revenue is growing.
It is easy to forget the danger that lurks below the surface in the public finances.
Ireland is still borrowing money to run the country every day.
Most countries do. But in Ireland there is a massive national debt of €200bn.
For a country of with 4.6 million inhabitants that is equal to €43,500 a head. Ireland pays €6.3bn in interest annually, which although less than it used to be, it is still a huge sum.
This year Ireland is going to continue to borrow. The general government deficit of €2.4bn for this year will add to the debt. Next year the figure will be €1.2bn.
So the very clear warning from the Department of Finance this week about tax revenue in the context of higher spending was particularly timely.
Given the pay concessions granted to the Gardai this week and its potential knock-on consequences for pay expectations elsewhere in the public service the warning carries some weight.
Even before the effects of the pay hikes the Government had committed to a late burst of spending.
In its commentary on the exchequer returns the Department pointed out spending was due to rise by €850m above revised expenditure estimates this year.
The extra costs were made up of a €500m top-up for the Department of Health, the restoration of the Christmas bonus for social welfare recipients, spending on flood relief and school building.
While the Department pointed out tax revenue was on target it said the performance would need to be strong in November and December to meet the extra spending.
For the first ten months of 2017 tax revenues were 1.7% above expectations.
So far the amount collected in VAT has been slightly behind target because there has been virtually no inflation while the Department expected the cost of living would rise by 1.1%.
There has been no sign of the rise in cross border shopping affecting taxes such as VAT so far. But that might be about to change.
Dermot O'Leary, chief economist with Goodbody Stockbrokers, published an analysis of cross border traffic flows based on latest figures from National Transport Authority.
After the Brexit vote in June his figures show a 29% increase in traffic numbers going to the North between 10am and 11am on Saturdays – which is a popular time for shoppers.
The overall impact on the economy may be relatively small but it is likely to hit towns closer to the border.
However, it may be more difficult to measure the increase in online shopping as consumers pick up bargains from UK websites following sterling’s 18% drop since the Brexit vote.
But there are some fundamental issues for the public finances. Spending is going up and is likely to increase some more. At the same time taxes need to perform strongly to meet that additional spending and there is worry about Brexit. All of that raises an interesting question – should Ireland still be borrowing money to run the country?
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