I can understand that. The Senator will recall the hullabaloo that followed that election, when some eminent commentators went off half-cocked in respect of the expenditure out-turn for 2002. I have spent a great deal of time in the Department of Finance and I have discussed other Departments with my colleagues. It is obvious to me that few people understand all the intricate aspects of the Government's accounts and expenditure. Some eminent writers on the subject do not seem to understand it too well. A Department cannot spend more than the amount that is devolved to it by means of the annual Vote.
The expenditure figures for the early part of 2002 were high, but I consistently said that the out-turn would be in line with the initial projection. We said that the increase in the Revised Estimates Volume would be approximately 14.4%. The year-on-year increase in expenditure in the early part of the year was well in excess of 14.4% but, lo and behold, the out-turn at the end of the year was approximately 13.9%, slightly less than what was in the REV. There was less hysteria in 2003 because many commentators' fingers were badly burned, in terms of public credibility, in 2002. They were proved to have been wrong. I do not have much difficulty with the Opposition making accusations and political charges, although it does not excite me too much. As a politician, I understand why Opposition politicians have to engage in such tactics. However, other people who should have gone to the trouble of getting their figures right did not go about their business as madly in 2003.
One gets the wrong impression if one takes one month with the next. If one examines the total expenditure figure to the end of February, which was mentioned by Senator McDowell, one will find that it is just 1% higher than the year-on-year increase for the previous year. The overall REV out-turn shows that there has been an increase of 7% in net voted expenditure for 2004 as a whole. The year-on-year increase until the end of February is just 1%, however.
I am familiar with the figures for 1999 because I read them in response to a parliamentary question yesterday. In most years, the figures at the end of February are considerably in excess of the out-turn for the year as a whole although they were much smaller in one instance. Some commentators have argued that the recent figures for the end of February demonstrate that it is obvious that the Government will not engage in as much capital spending, etc. Although I might like it if that were the case, it is untrue. I am almost sure, at the end of March, that the Departments will spend their allocations this year. As always, my difficulty will be to ensure, like any sensible manager should, that Departments' expenditure is not in excess of their allocations. If one bases one's estimates on the increase of 1% in the expenditure figures to the end of February, one might extrapolate that we will be under expenditure at the end of the year. That will not be the case, unfortunately, as a consequence of certain timing issues.
I published the profiles mainly to stop the nonsense that took place in 2002. We published on the website the predicted cumulative expenditure of the Departments, based on their best guesses, for each month. Some of the Departments' best estimations for their monthly profiles last year were not great, but we hope they will be better this year. The overall expenditure figures for 2003 turned out at the end of the year as we had predicted. My main reason for publishing the profile figures was to get away from the unadulterated nonsense that was written about spending in most of 2002.
I also decided to publish the Revenue Commissioners' estimates of their likely monthly receipts for 2003 and 2004. In previous years, the year-on-year figures, compared with the previous year, were given at the end of each monthly statement or in the quarterly Exchequer returns at which my officials give a press conference. Such documents usually mention that some elements of Exchequer receipts are above profile and others are below profile. I decided this year to publish the Revenue Commissioners' profiles.
As Senator McDowell is aware, estimates of taxation are different. I can control expenditure, but I am not in a position to know how much money will come in. The estimations of all tax receipts are based on the Revenue Commissioners' best guess-estimates, which in turn are based on the strength of the economy, employment levels and other factors.
The Senator is correct to state that to the end of February, tax receipts have increased on 2003. Most of that relates to capital gains tax, however. Capital gains tax is above profile for two reasons. Estimates of capital gains tax are the most difficult to predict because, by their nature, they are based on once-off transactions. Capital gains tax was usually paid on one date each year until I made a change in the Finance Act 2003. It is difficult to estimate the capital gains tax figure for those two reasons. In the 2003 Act, I changed the capital gains tax payment dates to bring them into line with the self-employed income tax payment dates. It is all now paid on 31 October. Capital gains tax was previously paid a year in arrears. I received a large amount of money in 2003 from capital gains tax because, in effect, I received two years' capital gains tax in one year.
Another change I made in the Finance Act 2003 meant that deals done in the last three months of the year were treated on the basis of a current year assessment. I introduced a measure to ensure that taxes from deals done in the last three months of the year, which could not be paid by 31 October, had to be paid by 31 January. Therefore, the tax receipt figures to the end of February include the extra capital gains tax payments made by 31 January, under the terms of the measure that I brought into effect last year. The capital gains tax figures to the end of February are approximately €200 million greater than those expected by the Revenue Commissioners. The next big payment of capital gains tax will be received by the Exchequer on 31 October next, in line with the normal payment system on that date. Revenue from capital gains tax is above profile.
Interestingly, the income tax and VAT figures to the end of February are slightly below the Revenue Commissioners' profile. I emphasise that the decrease is slight and not something about which we should be alarmed. As income tax and VAT receipts are better indicators of the level of economic activity, we should take greater notice of them. Having said that, it would not be correct to make any assumptions based on the Revenue Commissioners' figures for the first two months of the year. Equally, the figures for the first quarter, which will be published in approximately ten days' time, are not a suitable basis for any projections. It will be necessary to wait until much later in the year before I will be prepared to say, for example, that there will be a downturn in taxation.
I have endeavoured to explain the relevance of the figures for the end of February. Capital gains tax is above profile for the reasons I have outlined. The two other main taxes that I have mentioned, income tax and VAT, as well as excise taxes, are slightly below the Revenue Commissioners' profile at the end of February. I am sorry for having spoken at such great length.