Solid economic growth and a booming property market have left the public finances in robust condition for this year, new figures have revealed.
Final Exchequer figures for 2004 show that the public finances ended the year with a surplus of €33 million.
The out-turn was significantly better than the Department of Finance was expecting at the start of the year. At that stage, it was expecting to have to borrow €2.8 billion to fund its 2004 spending requirements.
The better performance was driven by tax revenues, which came in €2.1 billion ahead of forecasts. About one third of this unexpected tax income came from special investigations led by the Revenue Commissioners, but the biggest single contributor to the excess was the property market. All of the main property taxes - stamp duty, capital gains tax and VAT - came in ahead of budgetary targets, with capital gains tax alone bringing in €665 million more than expected.
Income taxes were also solid, albeit on a more pedestrian scale. The Department said income tax revenue would have been more or less on target without the €695 million injection from special Revenue investigations.
While still a healthy outcome, this 8.6 per cent underlying increase in income tax receipts was less buoyant than employment growth throughout 2004 might have suggested.
Figures released by the Department of Enterprise, Trade and Employment yesterday showed that redundancies fell in 2004 for the first time in four years. Almost 24,000 redundancies were notified last year, a fall of more than 4,000 - or 15.6 per cent - on 2003. A decline had been expected, but the reduction was boosted in December by a particularly sharp drop. The 1,293 redundancies notified last month amounted to the lowest monthly total for the year.
The Department of Finance suggested yesterday that much of the new employment created last year may have come at the lower end of the income scale and may not have made a large contribution to income tax receipts. Moreover, the full-year impact of the new jobs on tax revenue would not show up until this year, officials added.
On the other side of the public finances, a number of Government Departments failed to spend all the money allocated to them for the year. This €343 million underspend meant that public spending grew by 5.9 per cent, less than the 7 per cent originally planned. Departments will, however, bring forward €237 million of last year's allocation into their 2005 budgets. Other savings worth €315 million came last year from factors such as lower interest payments on the national debt.
The Minister for Finance, Mr Cowen, welcomed the full-year 2004 out-turn. "I am pleased that our economy performed better than expected, especially in the housing and construction sectors," he said. "I also welcome the fact that in 2004 the Government carefully managed spending so that it came within target."
Opposition parties were less generous. Mr Richard Bruton, Fine Gael's finance spokesman, accused the Government of displaying the worst credentials of old-style socialist governments through high taxes, inefficient public spending and a penchant for "prestige" projects which do not meet real needs.
"People should not be deceived into thinking that the revelation of an Exchequer surplus in 2004 is an indication of good management of our finances," Mr Bruton said. "It takes no particular skill to raise taxation."
The Labour Party's spokeswoman on finance, Ms Joan Burton, accused the Government of scrimping on public services.
"The reality is that this Government has no interest in delivering decent public services and is incapable of delivering on the major investment programme that our economy requires," Ms Burton said.