The Exchequer statement for December 2012 issued by the Department of Finance yesterday is overall a very positive development for the economy – there was a spectacular bounce in tax revenues during the month which means that the €171m shortfall in year-to-date tax income recorded in November 2012 was reversed and we end the year an impressive €271m ahead of plan. Current spending however got modestly worse in December and we ended the year €666m behind plan, compared with an €654m adverse variance in November. But the third element of the basic national profit and loss account, capital expenditure, it really had an amazing turnaround in December because at the end of November 2012 we had spent €2.446bn of our capital budget which was a whopping €405m behind budget. This shortfall was the subject of trenchant criticism on here because what the Government was apparently doing, was cutting back on the capital budget so as to fund overruns in current spending, mostly in James Reilly’s Department of Health, and in the Department of Social Protection.
But by the end of December 2012, capital expenditure had climbed €843m from €2.446bn to €3.489bn and at year end, capital spending was just €145m behind budget. Amazing.
And slightly incredible, that one quarter of the total annual spend was in the final seasonal month of the year, The information released yesterday doesn’t give any breakdown of the spend in December 2012 by project but we do learn that Phil Hogan’s Department of the Environment spent €352m in December alone, and Leo Varadkar’s Department of Transport, Tourism and Sport spent €286m.
That we are spending our capital budget is to be welcomed because this is one way in which our tax euros get recycled back to us, and economists will tell you that shovel-ready construction in particular is one of the best ways of a government generating economic growth. By not spending €145m of the capital budget in 2012, we have lost 1-3,000 jobs based on Department of Finance and NAMA projections.
But did we really spend €843m on capital projects in the month of December? Because if we did, you would expect a big boost to employment figures which will be released at 11am today by the CSO. Somehow, though I have my doubts.