The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Cabinet Minister yesterday said the $200 million rise in the Government’s recurrent spending was not what it seemed, and largely represented the transfer of expenditure between accounts.

Michae Halkitis, minister of state for finance, said the $200 million increase was planned, and represented the movement of items previously classified as capital spending into the recurrent account.

During his contribution to the mid-year Budget debate, Mr Halkitis sought to address private sector queries over the spending increase.

“It was actually planned, and represented largely the movement of items out of the capital budget into the recurrent,” he said, adding that this move had been flagged in the May Budget, and was part of moves to bring the Government’s accounting into compliance with international standards.

However, even with the $53 million reduction in year-over-year capital spending to $91 million at end-December, the Government’s total spending is still ahead by $147 million for the 2015-2016 half-year.

As for the $62.636 million increase in the Government’s 2015-2016 spending estimates, Mr Halkitis said: “Our policy has been that we will do that within the framework that we have. Instead of seeking to add to the spending, we would just reprioritise within the framework that we have.

“The bottom line is we expect to meet our targets, which if we do so will see the annual deficit reduced form $539 million in our first year when we took over to $141 million this year, cutting the deficit by almost $400 million.”

The mid-year Budget data revealed over $62 million in spending that was not anticipated when the Christie administration presented the 2015-2016 Budget to Parliament. The revised estimates take the Government’s total spending for 2015-2016 to $2.403 billion from $2.34 billion, a 2.7 per cent increase.

While reassuring that the Government would meet its $141 million fiscal deficit target, Mr Halkitis said the majority of the Government’s revenues are traditionally earned in  the second half of its financial  year.

“The reality is that our revenue is not evenly distributed throughout the Budget year,” he added. “In the Budget we forecast  revenue of $2.047 billion for the full year. At the half way point we had collected $905 million or 44 per cent, just under half.

“By comparison, in 2014-2015, for the full year we forecast that we would collect $1.77 billion in revenue, and the amount collected at the half way point was $688 million or 39 per cent.  We don’t collect half of the revenue in the first half.”

Mr Halkitis added: “In the 2014/2015 Budget we forecast a GFS deficit for the full year of $286 million. At the mid-year, December 31, the deficit was $273 million, 95 per cent of the total, but by the end of the year the deficit was $198 million, actually lower than the mid-year.

“In the second half we caught up. It’s not unusual. It’s no mystery to this. At the beginning of the year the revenue is lower, but at the end of the year because we have so much of our major  revenue items collected in the second half, we catch up.

“Business license, commercial automobiles, property taxes, bank fees, they all come in heavily loaded in the send half of the year, January to June. It’s incontrovertible that we have reduced the deficit by $400 million since we came to office. That is incontrovertible.”