The Economy is Fine (Except the E3 Billion Deficit)

The government released the Exchequer figures for nine months this afternoon and it is a wonderful mix of spin and fact. The release begins with the bad news; the deficit for nine months of 2007 has grown to €3.1 billion. That is well ahead of the €546 million deficit forecast for the full twelve months.

For a government who have a history of under predicting tax takes the deeply worrying point is they have failed to be conservative enough on this years financial take. The interesting point however is Brian Cowen’s attached response. He is happy with the economy and the targets for growth (citing a CSO figure of 6-7%) and 85% of the taxes are coming in almost on target such as income tax, corporation tax, VAT and excise duty.

However its a measure of how fast and loose the housing market became that it turned a deficit of 136 million into one of 3.1 billion a factor of 22 times larger in one year. Cowen’s focus on the regular incomes shades the fact that for a deflated housing market has cost the exchequer a great deal in potential expenditure. Failure to stabilise the market and implement a policy focussed on sustainability looks like it will have an effect on budgets.

Its a simple correlation to make but one must consider the overlap in timing between a downturn in exchequer figures, from June onwards and a cut back in visible HSE funding. However it raises the same ol questions as every year after an election, were the books cooked and did the parties know it was not all sweetness and roses in Dept of Finance? Spending cuts have been mooted for a while now but this cements a potentially far longer period of spending constraints.

The question in my mind is this, if they failed to manage the housing market (one that still has a long way to fall) properly and kept telling us everything is fine what is to stop them doing the same thing in the wider economy?  

Intersetingly Joan Burton continues the niggling attacks that are now attached to every press release from opposition parties in her response to the figures, she wonders how they will cope with these figures and unveils the opposition strategy of attempting to set the Green Party goals by which this budget will be a measure of them.

What the Green Party will make of the Budget negotiations in much tighter financial circumstances is difficult to assess. The challenge for the Greens will be whether or not they will seek to protect essential public services, while also securing funding for climate change programmes.