Public purse in black for first time since 2006

THE Exchequer recorded a surplus of €106million last year – the first since the country was plunged into financial chaos more than a decade ago.

The windfall came two years ahead of Government forecasts and was driven largely by corporation tax receipts, valued in excess of €10billion, which vastly exceeded expectations.

As a result of the high corporate tax returns the State is expected to revise its expectations for next year’s budget, and focus on reducing Ireland’s reliance on the volatile corporation tax.

But Leo Varadkar said the tax returns meant Ireland would be protected against future economic shocks, saying: ‘It’s the first time in ten years that we’ve recorded a budget surplus. It means that we’re very well prepared for a downturn, for an economic shock, if that were to affect us, much more prepared than other countries.

‘The vast majority of European countries, including the UK, are still running deficits.’

The Taoiseach said the excess funds were the result of a €250million under-spend and a ‘very big increase’ of between €1billion and €2billion in corporate tax income.

He said the under-spend was largely related to service costs for the national debt.

Paschal Donohoe was keen to impress the importance of reducing Ireland’s reliance on corporation tax, saying this was the reason he had raised Ireland’s hospitality VAT rate from 9% to 13.5% in the last budget.

To do this, the Finance Minister will prioritise reducing the overspend at Government departments – singling out the Department of Health – rather than introducing additional taxation.

He said: ‘The main contribution that we can make to how we could deal with a potential difficulty in the future, and reliance on corporate taxation, is more about how we manage our expenditure, rather than how we deal with tax changes.’

Decisions had to be made ‘regarding our level of capital expenditure in the future. What level does it need to continue to be at?’

Mr Donohoe said it was also important that ‘all Government departments, and in particular the Department of Health, stay inside their budgetary framework, which clearly did not happen last year.’

Last year’s Department of Health overspend was an estimated €600million but it may struggle to eliminate that deficit, say critics.

He said: ‘If we get the spending part of our equation more in line with where we expect it to be, which is our determination for this year, that in itself will make a very significant contribution to our potential reliance on corporation tax.’

Yesterday’s announcement marked a significant turnaround in fortunes for Ireland since the last surplus in 2006. Ireland’s deficit ballooned to 14.3% in 2009 when property prices collapsed, sparking a banking crisis and a three-year international bailout.

The Exchequer recorded €100million surplus last year but this was due to the sale of €3.4billion of AIB shares.

‘Well prepared for an economic shock’