A surge in tax revenue has left the Government finances in their strongest position for 50 years and opened the way for substantial tax cuts in the Budget. Exchequer figures for the nine months to the end of September show that total Government revenue was more than £1 billion ahead of forecasts, reflecting extremely strong economic growth.
The Minister for Finance, Mr McCreevy, has described the latest figures as "exceptional" but warned that people should not have "unrealistic expectations" from the Budget. Economic analysts believe the Minister has room to deliver tax cuts of £500 million on December 3rd and still aim to have no Exchequer borrowing next year.
Mr McCreevy said while he would endeavour to be as "generous as possible" to taxpayers, this must be done within "the balance of prudence. Taxpayers are entitled to get some money back but we must also keep tight control of spending to qualify for European Monetary Union." He added that prudent management of the economy over the past decade had brought the economy to where it is now. "This discipline is absolutely necessary if we are to secure an equitable distribution of the fruits of growth while endeavouring to observe the financial discipline that has delivered the present good performance and that will continue to be essential in EMU."
The buoyant nine-month figures - the strongest in some 50 years - show that every area of the economy is booming with each sector of Government revenues growing well ahead of expectations. Tax revenues so far this year have been running 14 per cent ahead of the same period last year at £10,534 million. At Budget time, the Department of Finance had forecast 6 per cent growth in revenues.
Overall, Exchequer tax revenues exceeded spending by £506 million in the first nine months, compared to a £185 million surplus in the same period last year.
Further good news for the Government came in the form of Central Bank figures which showed a slowdown in the growth in mortgage-lending in August, which may ease concerns about an overheating housing market.
The tax figures showed that much of the increase in revenues was due to the substantial number of new jobs which have been created this year. The Department has already been forced to increase its estimate for the growth in employment twice already this year, raising it from 45,000 people at Budget time to 52,000 in June. Given the strength in tax receipts, officials now concede that the true figure could be closer to 60,000.
The Exchequer figures also suggest the underlying rate of economic growth has surpassed all expectations. Government analysts say the economy could be expanding at a rate of between 7 and 8 per cent, but private sector forecasters now believe that gross national product could rise by as much as 10 per cent this year.
Government spending is running broadly in line with expectations despite an additional payment of £300 million. The Minister has so far this year moved to pay back £150 million to the An Post and Telecom pension funds. He has also added £100 million to the Small Savings Reserve Fund and paid £51 million to Bord Na Mona as part of an outstanding commitment towards the restructuring of the company.
The figures show a surplus of revenues over Government spending in the nine months at a record £509 million, compared with £185 million in the same period last year. The result left even the traditionally ultra conservative Department of Finance officials admitting that the Exchequer funding position is now "very comfortable."