Financial Resolutions, 1978: Financial Statement, Budget, 1978. - Review of 1977 Budget Outturn
These were the more important economic indicators for 1977. I might appropriately at this stage deal with last year's budget—which still had half of its course to run when the present Government took office. The outturn figures on both current and capital account were close to the original estimates. Allowing for the reclassification of certain items of expenditure, which has already been referred to both in the Estimates volume and in the Public Capital Programme booklet, and on which I shall speak in more detail later on, the deficit on current account was £201 million compared with the original estimate of £220 million; expenditure on the public capital programme was £659 million, or only £3 million short of the estimate. These small variations, however, concealed a number of significant changes in individual items of revenue and expenditure. Immediately we took office, the ban on public service recruitment was lifted and new job-creation in the public sector got under way rapidly in the second half of 1977, with particular emphasis on recruitment of extra gardaí and teachers; the system of marriage differentiation in public service pay scales was abolished with effect from 1 July 1977; capital spending on roads, local improvement schemes and environmental works was expanded and effective measures were taken to ensure that there would be no repeat of the massive underspending of capital allocations which was a feature of the previous year. In the event, there was an increase of 20.3 per cent in public capital programme expenditure over the 1976 level. I might single out for special mention the Agricultural Credit Corporation, the increased demand for whose services accounted for an excess of £20 million.
Even with the additional manifestorelated spending and some other excesses which had not been budgeted for, there was a total saving of £73 million on current expenditure. The bulk of the saving was on the cost of servicing debt and was due to the fall in interest rates and the improved performance of sterling. The lower level of unemployment also led to a saving on social welfare costs.
The expenditure saving was nearly matched by a shortfall of £54 million on the budget estimate of revenue, some of it intentional and deriving from post-budget policy changes. The removal by this Government of motor vehicle duties from all cars up to and including 16 horse-power cost about £13 million. Secondly, there was the modification, by the previous Government, of their policies for the taxation of farming profits which accounted for a further £20 million or more and will also affect the yield in future years. Reductions in excise duties from tobacco and in VAT receipts accounted for most of the balance of the shortfall.
The net result of these variations was that the current budget deficit fell by £19 million. The small saving of £3 million on public capital programme spending, together with some other variations in capital resources led to a net reduction of £9 million in the borrowing requirement on capital account. In all, therefore, the Exchequer borrowing requirement was reduced by £28 million, from £573 million, as originally estimated, to £545 million.