Exchequer Returns

A year ago, the Department of Finance could only look on with dismay. The exchequer figures showed revenues had fallen by €5.5bn to almost €41bn in a year. The first of several budgets, mini-budgets and levies had already been announced. The report into the loans of the banks had been commissioned and the government must have known that, despite the pronouncements of leading bankers, it would have to sink many billions of euro of taxpayers' cash into the delinquent lenders. It may already have had an inkling of the horrors that were in Anglo.

The exchequer figures – the monthly list of tax receipts and government spending – were already showing all the signs of economic stress. Value added tax (Vat) provides the most accurate and most timely reading of economic activity and is also the single largest source of tax sourced for the government. Last year the Vat take had dropped about €1bn to €13bn. Income tax, the second largest revenue source, at €12.5bn, was holding up surprisingly well, and, excise duties, unchanged at €5bn, were also cheering.

But corporation taxes had also dropped by over €1bn to €4.9bn. A year later and government revenues swirled down the plug hole. Vat receipts to the end of November fell €2.7bn to €10.3bn. With €1.2bn less paid, income tax revenue fell to €11bn and excise duties dropped by more than €1bn to €4bn. The current deficit moved to €10.4bn from just €1bn a year ago. Add in the capital spending, and the overall deficit shot up to €22bn from a shortfall of just €7.8bn last year.


The Central Statistics Office's monthly publication warns that the live register figures should not be considered a measure of joblessness – the size of the labour force is after all measured by the less frequent household survey. But the live register also includes people who are, involuntarily, working part-time only and is a very effective measure of economic inactivity.

Last week, the CSO reported that – including the 73,630 people working part-time – 413,505 people had signed on the live register by the end of November, meaning that 12.5% of the work force is unemployed.

It is undoubtedly a slowing trend, but cheering an unemployment rate which may peak next year at a lower level than initially feared is a very small victory indeed. The jobless rate has quadrupled in about two years. Surprisingly little attention last week fell on the 3,785 people who are working in temporary jobs and will most likely re-join the live register full time in a number of months. Then there are the 21,894 people on full-time Fás training courses and 8,386 in community employment schemes.

Like the 1980s, there are many more out of work than the carefully categorised official figures suggest. Meanwhile, the debate has focused on cutting the payments for some groups of young unemployed in Wednesday's budget.

Retail sales

The retail sales measure lags the Vat returns but it provides greater detail on the big questions of the day – is the Newry shopping effect really as big an economic deal as some in Ibec insist and is the Ikea store in Ballymun helping to stem the tide of shoppers heading north to the other Ikea store in east Belfast? The figures are startling. Starting last January, the volume of retail sales, excluding price discounts, tumbled by a record 26.5% from the previous year. It meant that people were then buying 25% less of almost everything across the 13 types of shop the CSO surveys. After cars – where a third fewer were sold this September than a year earlier – sales of hardware and paints (-17%), books, newspapers and stationery (-15.6%), and furniture and lighting (-12.7%) fell fastest by volume. The three categories showed even steeper falls – by as much as 30.7% – when measured by the amount of euro spent. The opening of the Dublin Ikea appears to have given little boost to the sales of furnishing and lighting. Sale of drugs and cosmetics was the only category to record an increase. Ireland's plunge in retail sales was among the steepest in Europe until the Latvians, Slovenians, and latterly, the Greeks joined us in spending considerably less in the shops. By September, the annual descent had eased to 10%. According to the European-wide figures, the Polish retail market is Europe's healthiest with about 5.5% more goods bought in September than a year earlier.


Consumer price inflation indirectly signals the strength of economic activity. In recent times, the CSO shopping basket has shown that prices have fallen. Few people benefit from deflation – company profits fall and jobs are usually lost. But there is growing suspicion that consumers are failing to benefit from the surge in the euro. A strong currency, which surged by 25% in just over two years, if passed on to shoppers in the form of lower prices should boost the volume of sales and jobs. Most people would win, including the minister for finance, who could tap increased Vat receipts. Significantly, we have heard more about the Newry shopping phenomenon than the reasons why a 25% rise in the euro has not led to price decreases in the numerous goods directly trucked across the Irish sea from Britain. Prices rose strongly throughout last year even as the euro bounded ahead. The big currency gains make October's 6.6% deflation look surprisingly modest.

The Big 4 indicators clearly show that there is little sign of an economic upturn. The best hope for the government is that its Vat revenues will be boosted as consumers regain the confidence to spend and not save. The latest retail sales snapshot shows little evidence that this is happening. Some 350,000 public-sector workers will hardly be in the mood next year to buy new 2010 car marques. Some commentators say that November's exchequer figures show that the economy is stabilising but, at best, this means that the Irish economy, which has plunged deeper than anywhere else in the advanced world, will be stuck in a very deep trough next year.