OPINION – Double dip?

The Legislative Assembly is the center of our political regime until early December. The CE has presented the policy guidelines and will be followed until early by the Secretaries for more detailed comments in their respective areas.

But before we deal with the proposed orientations and the associated Budget, it is worth looking into the execution of the current accounts and check if they can tell us something noteworthy. 

The Finance Department keeps regular track of the Budget, and we can peer into how its execution up to October, that is, with only two months to go. Neither public expenditure nor public revenue is fully well-behaved.

Some elements show a degree of seasonality, and there is a bias in the execution of certain expenses that often will fall on the last months of the year. Those features aside, we should expect, as a rough guide, in regular times, that a very high proportion of the Budget would be executed by now.

As the economic performance this year has deviated wildly from the business-as-usual expectations that informed its design and approval, we could anticipate significant divergences from the custom – and so it is.

Taxes collected regarding the previous year’s income are the only ones that follow a relatively ‘normal’ path and stand at more typical levels. All taxes associated with the level of economic activity took strong hits. 

Indeed, none more so than taxes associated with gambling revenue. Up to October, they stand below half the values budgeted for the year, and just over a quarter of the figure recorded in the same period in 2019. 

This alone blows a hole in the whole budget revenue structure, as that one is by far the main component of total revenues, representing 85 per cent of those in the approved Budget. The damage is unmistakable. Even a slight improvement in visitors or gambling, in November and December, will come too late to rescue the year – if it happens at all in a significant way, 

Somewhat surprisingly, amid a significant contraction in private revenues and expenditure, public expenditure is also trailing well behind its customary ‘execution time.’ That is the case for both current and capital items.

They were standing respectively at about two-thirds, and less than half of the authorized budgets. Even in these most extraordinary circumstances, the public coffers are running a surplus, suggesting the Budget is not operating as a counter-cyclical tool.