The deficit and debt repayments

Nat O'Connor05/12/2012

Nat O'Connor: The brief ten pages of the 2013 Estimates include the stark reminder of just why the Government is set on €3.5 billion of tax increases and spending cut today. Receipts in 2012 were just under €41 billion, wheresas spending was around €56.5 billion. That's a gap of €15.5 billion.

The actual deficit in the General Government Balance is slightly less, at €13.4 billion (Table 1a in the same document).

The gap shows the growing importance of the national debt interest repayments in making the public finances unsustainable. Servicing the national debt cost us nearly €6.5 billion in 2012 and is set to rise to €8.1 billion in 2013. That's nearly as big as the entire education budget (€8.7 billion in 2012). The details of public spending can now be seen at DoPER's databank.

This point is graphically illustrated on page 12 of the Medium Term Fiscal Statement, which is the other document currently on budget.gov.ie. A copy of that image is below:


The debt interest burden is projected to peak at 16 per cent of all Government revenue in 2014.

A serious concern with these projections (and the assumption that the deficit and debt interest payments will stabilise) is that projections of economic growth have repeatedly been over-optimistic. The IMF now calculates that austerity in developed economies means that for every €1 taken out through tax or cuts, between €0.9 and €1.7 will come out of economic output (GDP) - see page 43 of IMF's World Economic Outlook. There is a real risk that even this grim picture of debt interest repayments may be over-optimistic.

At any rate, it is certainly the case that a major win on reducing the bank debt part of the national debt (and annual debt servicing costs) needs to be achieved.

Dr Nat O'Connor     @natpolicy

Nat O'Connor

Nat O’Connor is a member of the Institute for Research in Social Sciences (IRiSS) and a Lecturer of Public Policy and Public Management in the School of Criminology, Politics and Social Policy at Ulster University.

Previously Director of TASC, Nat also led the research team in Dublin’s Homeless Agency.

Nat holds a PhD in Political Science from Trinity College Dublin (2008) and an MA in Political Science and Social Policy form the University of Dundee (1998). Nat’s primary research interest is in how research-informed public policy can achieve social justice and human wellbeing. Nat’s work has focused on economic inequality, housing and homelessness, democratic accountability and public policy analysis. His PhD focused on public access to information as part of democratic policy making.


Share:



Comments

Newsletter Sign Up  

Categories

Contributors

Sean McCabe

Sean holds an B.Sc in Applied Physics from Dublin City University and an M.Sc. in …

Jim Stewart

Dr Jim Stewart is Adjunct Associate Professor at Trinity College Dublin. His research …

Paul Sweeney

Paul Sweeney is former Chief Economist of the Irish Congress of Trade Unions. He was a …



Podcasts