Dáil Éireann díospóireacht -
Tuesday, 19 Feb 2002

Vol. 548 No. 5

Written Answers. - Departmental Estimates.

Jim Mitchell

Ceist:

171 Mr. J. Mitchell asked the Minister for Finance if, in respect of his Department's Estimates of receipt and expenditure for 2001, he has sought an analysis or report on the reason the Estimates were wrong; if he will give details of the factors contributing to the level of error; his views on suggestions that his Department incorrectly calculated the growth in revenues; and if he will make a statement on the matter. [5756/02]

Minister for Finance (Mr. McCreevy):

My Department continually monitors and analyses the emerging budgetary position. On budget day 2001, current receipts were estimated at £24.522 million and the outturn at year-end was £22.633 million. A number of factors contributed to the shortfall in tax receipts. Overall economic growth was lower than expected on budget day. Budget 2001 was predicated on a forecast of 8.8% for real GDP growth for the year 2001. This economic forecast was based on the latest national and international data available to my Department at that time. Underpinning my Department's view of world growth was the EU Commission's autumn 2000 forecasts which expected growth considerably higher than that actually achieved.

My budget 2001 forecasts were not out of line with what was widely believed, at that time, as the likely growth scenario for this economy. The Commission autumn 2000 forecasts expected real GDP growth of the order of 8.25%, the OECD and the Central Bank about 8% and market commentators' forecasts did not differ substantially.

The lower economic growth due to the unforeseen outbreak of foot-and-mouth disease and related restrictions as well as to the effect on us of the slowdown in the United States economy, exacerbated by the terrible events of 11 September generated less tax receipts than expected, especially in the areas of income tax, value added tax and excises.

The methodology used to estimate the level of tax receipts in 2001 was similar to that used in recent years and was detailed in the report of the tax forecasting methodology review group, which is available on my Department's website. The forecasting methodology is kept under review by my Department. When new data becomes available new estimates can be made of the cost of tax changes. This factor added to the budget day cost in 2001 in the case of income tax.

The 2001 Revised Estimates published in March 2001 provided €20.268 billion for net voted current expenditure and €4.687 billion for net voted capital expenditure – a total of €24.955 billion. The 2001 outturn for net voted spending included in the end-December Exchequer statement was €25.308 billion, including the impact of balances. This gives an overall excess of €353 million or 1.4% of the total Estimate. Of that total, net voted current spending was €20.404 billion – giving an excess of €136 million or 0.7% of the net current REV provision – and net voted capital was €4.904 billion – giving an excess of €217 million or 5% of the REV net capital provision.

A number of reasons contributed to the increased current spending including,inter alia, a shortfall in ESF receipts, additional expenditure on health services and the cost of measures introduced to prevent the spread of foot and mouth disease. Additional spending in these and other areas was offset by emerging savings across all Departments. The increase in capital spending was due to infrastructural development on roads, water and waste services and additional spending on education and health capital projects.