Budget 2010 set out the forecasts for the general Government deficit for the period to 2014. The target for 2011 is for the general Government deficit to be 10% of GDP, which is an improvement over the planned deficit for this year of 11.5% of GDP. The most recently published fiscal data, the Exchequer returns for the first quarter, were broadly in line with expectations and demonstrate that the budgetary plan, as set out in budget 2010, is on track. Consequently, at this early stage of the year, there are no proposals to revise the targets.
The Exchequer deficit at the end of March 2010 was €3.9 billion compared to €3.7 billion at the end of March 2009. My Department published monthly targets for both tax revenue and net voted expenditure earlier this year. In regard to tax revenue performance, €7.2 billion in tax receipts was collected by the end of March. This was 15% below the same period in 2009 and was €266 million, or 3.5%, below target. A significant year-on-year decline is expected in the initial months of 2010, with tax revenues forecast to end the year 6% down on 2009. The overall tax revenue target for 2010 is just over €31 billion and, based on the information available so far this year, this target remains valid.
Total net voted expenditure at the end of March 2010 was €10.7 billion, representing a decline of some €1.1 billion or 9.2% on the same period in 2009. This significant year-on-year reduction reflects both the expenditure policy changes which the Government has implemented and also, to a lesser extent, timing issues. The Revised Estimates volume, published on 18 February, projected a 1.9% reduction in total net voted spending for 2010 as a whole.
In budget 2010, my Department estimated that the general Government deficit for 2009 would be 11.7% of GDP. The estimate for the headline deficit for 2009 has now been revised to 14.3% of GDP. The difference between these two estimates is 2.6% of GDP, of which 2.5% of GDP relates to the technical reclassification of the €4 billion transfer to Anglo Irish Bank made in 2009. It is important to note that on foot of this reclassification, no additional borrowing has taken place and the underlying position of a deficit of 11.8% of GDP for 2009 is broadly the same as that published in the budget last December. This technical reclassification has a once-off impact on the headline deficit. As such, it does not affect the Government's forecasts for the level of debt, or the forecasts for debt servicing costs, as the €4 billion had already been taken account of in the budgetary debt position. Furthermore, the fiscal consolidation plan as set out in the budget is not impacted by the reclassification.
Additional information not given on the floor of the House.
In regard to the recently announced further recapitalisation plan for Anglo Irish Bank and Irish Nationwide Building Society, consultation is ongoing regarding the treatment of the sums involved. Pending agreement of the restructuring plans for both institutions, it is appropriate not to make a provision in the deficit measurement until the matter can be reviewed on foot of any decision by the European Commission on the plans. As the Deputy is aware, the additional capital of €10.9 billion is being made available by way of promissory notes, payable over a ten to 15-year period. This will increase the general Government debt by the full amount in 2010. However, as regards the actual borrowing that needs to be raised arising from this, it is likely that an additional Exchequer borrowing requirement of approximately €1 billion will now be required in 2011 for Anglo Irish Bank and INBS. A likely indication of the interest costs associated with this additional borrowing would be in the region of €55 million per annum and, in the context of the overall budgetary numbers, this is manageable.
Work is ongoing regarding the adjustments that will be necessary in budget 2011 and, while difficult decisions will be necessary, the Government is committed to the implementation of the fiscal consolidation plan as set out in last December's budget. The budget projected that a €3 billion adjustment — €2 billion of which would relate to current expenditure-tax revenue adjustments — would be needed in 2011 as part of the process to restore the public finances to stability. While the nature of the adjustments to be introduced will be a matter for budget 2011, a number of areas for consideration in the context of future adjustments were outlined in budget 2010. The report of the special group on public sector numbers and expenditure programmes, the work currently under way regarding local authorities and the report of the Commission on Taxation will also have a role to play in the determination of future budgetary policy.