Donohoe: Deficit of €7.4bn "better than we would have hoped for"

The deficit in the public finances was €7.4 billion at the end of July, the latest figures show.

This compares with a surplus of €896 million in the same period last year.

The exchequer returns show the continued impact of the Covid-19 pandemic on the public finances and the Government’s spending to soften the economic blow across the country.

Minister for Finance Paschal Donohoe said that expenditure is now standing at €38 billion, which is an increase of 29.5% compared to the same point in 2019.

The level of deficit that we now have is in line with what we expected earlier on in the year.

The Covid-19 restrictions on businesses over the last few months also saw a huge impact on Vat receipts, which declined by €2.2 billion equating to 22.7% compared to the same period last year.

The Department of Finance said this reflected the “significantly reduced consumption”.

Mr Donohoe said: “While again this is a really considerable increase in expenditure, most of that increase is concentrated with where we are with health expenditure in terms of the funding that was needed for PPE, funding that was needed to help our hospitals deal with the consequences of this terrible disease.”

He said the other big drivers of the increase in spending was the Pandemic Unemployment Payment and the Wage Subsidy scheme.

“So even though this is a big increase versus a year ago, again it is in line with the guidance that we published in the stability programme update,” he added.

Tax receipts are also down 2.5% compared to a year ago.

“While the figure there is of course big at a change of €791 million, that percentage change is a better performance than we would have hoped for earlier on in the year,” Mr Donohoe added.

“If I look at the drivers that are underpinning that on the positive side, we saw earlier on in the year a very strong performance yet again in corporate tax.”

The total expenditure was €38,072 million – an increase of €8,662 million – compared to the same period in 2019.

The rise in expenditure reflects increased departmental spending in response to the Covid-19 pandemic.

Mr Donohoe added: “Overall, the exchequer figures today, while they show a really significant change on where we thought we were going to be at the start of the year and a very big change on where we thought this particular month would look like, the level of deficit that we now have is in line with what we expected earlier on in the year.

“It’s aligned with what we indicated in the July jobs plan.”