New data reveals €5billion improvement in Exchequer deficit year-on-year

New data has revealed an improvement of €5billion in Exchequer deficit in 2021 compared to 2020. 

The Department of Finance released the information today, which shows a total Exchequer deficit of €7.4billion. 

Speaking about these figures, Minister for Finance, Paschal Donohoe, said, "The end-year Exchequer returns show that the deficit was lower than expected last year. This reflects several factors, including stronger corporate tax receipts, underspending in voted public expenditure and the more rapid than anticipated recovery in the domestic economy, in particular, the labour market." 

The deficit was recorded to the end of December 2021 and compares favourably with 2020's €12.3billion. 

The improvement is largely due to an increase in tax revenue, particularly from VAT and corporation tax receipts, which are up by 24% and 30% respectively. 

Together, they account for over 22% of total tax revenue. 

Although Minister Donohoe stresses corporation tax receipts continue to underpin revenue growth, he said it is "highly likely" the receipts will decline "at some stage". 

He said, "This is why we must ensure prudent management of the public finances so that we are not left with a structural gap between revenue and expenditure in future years.” 

The Minister for Public Expenditure and Reform, Michael McGrath, also commented on today's data. 

He said the provision of thirteen and a half billion euro in Covid-19 expenditure from the overall yearly gross (€87.5billion) has "supported the delivery of key public services" during last year's Covid challenges. 

He said, "Critically it has also provided essential income and employment supports to our workers and businesses, with in aggregate expenditure on the Pandemic Unemployment Payment and the Employment Wage Subsidy Scheme amounting to €8.6 billion in 2021. 

"These measures, in protecting incomes and maintaining the link with employment, have supported the recovery in employment." 

Both ministers highlighted the importance of support for impacted sectors during the Omicron surge, however Minister Donohoe said, "Once we overcome this wave of the virus and reopen the economy, it is essential that we pivot away from generalised supports and transition towards more targeted fiscal measures."