The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s recurrent account “imbalance” grew by a sum equivalent to 1.7 per cent of GDP during the former Ingraham administration’s term in office, the minister of state for finance said yesterday.

Michael Halkitis, during the Mid-Year Budget debate, said the gap between the Government’s revenue income and recurrent (fixed) costs grew from 0.8 per cent of GDP in 2006-2007 to 2.5 per cent in the former government’s final year.

“The vitally critical structural imbalance in our public finances is one that must be reversed on a priority basis if we are to return to a solid and durable position of fiscal sustainability for the long haul,” Mr Halkitis said.

“During the five-year mandate of the previous government, recurrent expenditure in relation to the size of the economy grew from 17.4 per cent to 20.6 per cent of GDP. However, the ratio of recurrent revenue to GDP only rose from 16.6 per cent to 18.1 per cent of GDP.

“Recurrent expenditure thus grew by 3.2 points of GDP, while recurrent revenue increased by only 1.5 points.”

Reiterating previous accusations made by the Christie administration, Mr Halkitis said the GFS fiscal deficit measurement for the 2011-2012 fiscal year had come in at $445 million, compared to a projected $248 million.

Arguing that “almost everything that possibly could go wrong from a fiscal perspective did in fact go wrong”, Mr Halkitis said recurrent and capital revenue undershot the Ingraham administration’s projections by $82 million and $45 million, respectively, while capital spending exceeded forecast by $115 million.

He added that the Ingraham administration constantly over-estimated revenues, missing its target by 3 per cent in 2010-2011 and 7 per cent in 2009-2010. The shortfall, the minister said, totalled some $219 million.