The Taoiseach last night indicated a generous spending package in next week's budget after new figures showed the Government will have €2.7 billion more than expected at its disposal.
The dramatic improvement in the financial forecasts for next year is due to increasing optimism about tax revenues.
Mr Ahern told Fianna Fáil supporters at a party dinner last night that the Minister for Finance was finalising his budget - to be delivered on Wednesday - against a stronger than expected background.
Among the measures expected to be announced next week is a €130 million-plus package aimed at elderly voters including an increase in the old-age pension to €208 a week. The Progressive Democrats are also pushing for a 1 per cent reduction in the top rate of tax from 42 per cent at a cost of €228 million a year.
The Taoiseach simultaneously dampened expectations of a pre-election spending splurge. The Government "will stick to the right course of prudent investment for Ireland's future" which is "yielding real results", Mr Ahern told the annual Cáirde Fáil dinner attended by 2,000 party members.
The Estimates of Receipts and Expenditure for 2007 - known as the pre-Budget White Paper - indicate that the Government will have a surplus of income over expenditure of €4.4 billion next year. However, this figure will fall when the additional spending measures to be announced in next week's Budget are factored in.
The figure in the White Paper contrasts with the previous Government forecast - made in October - which predicted a surplus of just €720 million.
The Opposition reacted to the figures with surprise last night, and accused the Government of massaging public accounts.
"Instead of creative accounting, the Minister would be better employed in getting his sums right. Once again, the 2006 Budget forecasts have been proven to be so inaccurate as to be embarrassing," said Labour finance spokeswoman Joan Burton.
The new figures reflect expectations for solid growth in tax revenues next year, on top of already high levels achieved during this year. Compared to 12.5 per cent growth this year, tax revenues are expected to grow next year by 9 per cent, to reach a total of €49,520 billion. Government spending is set to grow by 9.5 per cent.
Ulster Bank chief economist Pat McArdle said yesterday's figures reflected a much stronger outlook for taxation. "Tax revenue revisions provide extra money to facilitate a big pre-election spend and at the same time, a larger-than-expected surplus."
Mr McArdle attributed the improved outlook to the far stronger performance of tax revenues related to the property market.
However, the Government appears to be expecting a fall-off in growth in property taxes next year. Stamp duty revenues, which are up 39 per cent in the current year to October, are expected to grow by just 6.6 per cent next year.