We may be on course but worrying trends remain

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If the economy is not as bad as had been expected, then government finances ought to have been better than expected – and they are not

'I AM playing all the right notes" – comedian Eric Morecambe famously said to conductor Andre Previn after a disastrous foray on the piano – “but not necessarily in the right order”.

The Department of Finance is playing all the right notes in terms of the state of the public finances half-way through this critical year.

Total taxes collected came to just more than €14.4bn. that is just 1.6pc less than the department projected in the Budget way back in December. Given the scale of the uncertainties in a crisis like this, that looks like pretty good forecasting.

They seem to be having an even better performance on the spending side, which is 7pc less than in the same period last year. But the notes are not quite in the right order. the mood music is still mixed.

The bigger worries are on the tax side. Although the total looks fine, it hides some puzzling, even disturbing trends. The main one is income taxes, where the €5bn collected was almost 6pc below forecast. Luckily for the overall total, both VAT and corporation tax brought in a bit more than expected.

There are two reasons to be concerned about this. The first is that the department’s difficulties in forecasting income tax, which were obvious during the bubble, continue during the bust, despite all the experience gained.

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