First, relating to the point raised in yesterday's post: Minister Lenihan stated that
"On the spending side, overall net voted expenditure at €46.4 billion was over €700 million below the level recorded in 2009, reflecting the ongoing tight control of public spending. While day-to-day spending was marginally ahead of target in the year, this is due to a shortfall in Departmental receipts rather than overruns in spending."
As I outlined earlier, I beg to disagree with the Minister on the claim of 'tight control'. Let me add to the reasons for my disagreement:
- The Exchequer Returns show that the Government had an overall budget deficit of €18,745m in 2010,
- On the surface, this appears to be ,896m lower than the deficit in 2009, which stood at €24,641m.
- However, deficit 2009 included a €3bn payment to the National Pensions Reserve Fund as part of the banks recapitalization plus a €4bn re-capitalization injection into Anglo Irish Bank
- Deficit 2010 does not include bank recapitalization measures.
- 2010 = €18,745m
- 2009 = €17,641m
Next, let's take a look at the annual data for Irish Exchequer over the recent years, incorporating latest release.
First, receipts v expenditure over time - for 1983-2011 and on with my forecasts. All data is annual:
Notice that with exception of 3 points - all observations fall to the right and below the 45 degree blue line. Also notice that the trend over time has been toward greater excess expenditure. Overall, however, 'when I have it, I spend it' relationship really does hold - the RSq is high 0.9413.
Latest figures show that in 2010 the Government has savaged capital investment side of its balancesheet and failed to curb current spending. This too is consistent with long term trends:
The age of Brian Cowen 'stimulus' (remember - he did say that we are going to have recession stimulus in the form of large capital investment) is now over and, despite Minister Lenihan's claims that we are not in the 1980s... guess what - 2010 we landed right into pre-1989 era.
Lastly, on to forecasts for the future:
Above chart clearly shows why I am with the IMF on the deficit outlook for 2014, and not with the Government. Apart from slightly higher total expenditure outlook than that of DofF, I expect slightly lower tax take and non-tax returns, but then I also expect the remaining costs of banks and subsequent increased interest repayment burdens to come due in 2011-2014 as well.