Exchequer Returns data released this evening by the Department of Finance (DoF) show that the Exchequer posted a €704m surplus in January 2013, compared to a deficit of €394m in the same month last year. The data are skewed by one-off items and also timing issues, nonetheless there are some important takeaways.
On the revenue side, the headline tax take was +3% y/y, but adjusting for timing issues relating to corporation tax receipts and the Health Insurance Levy (which contributed to a 400% y/y rise in stamp duty receipts) produces an underlying increase in tax revenues of 5.6% y/y. Within the tax headings, we are encouraged by the strong performance of income tax (+10% y/y), which the DoF attributes to “a more benign labour market”. Elsewhere, Excise Duties were +10% y/y and VAT +1% y/y.
Non-tax revenues were €223m versus €345m in January 2012, with most of this decline due to a €73m y/y fall in ELG income (a function of the reduction in the liabilities covered by the scheme).
On the spending side, headline voted (discretionary) expenditure was +4.1% y/y at just under €4bn. Within this current expenditure was +7.2% y/y, but the DoF attributes most of this to “the timing of public service and social welfare paydays”…which is “purely a timing issue and will even out over the course of the year”. Of the 16 expenditure headings, 7 recorded a fall in spending relative to year-earlier levels.
During January the Exchequer received proceeds of €1.06bn from the sale of its Bank of Ireland CoCos, which helped to produce an overall surplus for the month. There were a number of items on the non-voted expenditure side that also helped to flatter the Exchequer’s performance relative to the year-earlier outturn, such as interest payments (€558m in January 2013 vs. €749m in January 2012) and loans to the Insurance Compensation Fund (€154m in January 2013 vs. €210m in January 2012).
Bringing it all together, while we would be loath to read too much into one month’s Exchequer Returns data, there are a number of encouraging signs from this release. In particular, we draw comfort from the 5.6% underlying y/y increase in revenues, while the bulk of the rise in day-to-day spending appears to be down to timing issues as opposed to indiscipline on the expenditure side.
Philip O’Sullivan, Chief Economist, NCB Stockbrokers Limited.
