"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery." The quote from Mr Micawber - a character in Charles Dickens's novel David Copperfield - precedes the introduction of decimalisation and the euro. But it is timeless advice on how to approach the eternal struggle between the pressure to spend and the limits of income.
Two weeks ago the Government did its sums on what it intends to spend next year. And yesterday, in addition to announcing Exchequer returns for the year to November, it pencilled in a figure for what it expects to receive from the taxpayer in 2006. Its pre-Budget White Paper set out the basis on which the measures proposed in Budget 2006 next Wednesday will be costed and justified.
As far as the latest Exchequer returns are concerned, the Government's position is one of happiness. In the first 11 months of the year, it ran an Exchequer surplus of €2,959 million, well in excess of last year's expectations. As well as underspending on the capital side, outgoings in certain categories of current expenditure are below expectations. In this regard, there are suspicions that the Exchequer position is being manoeuvred into position for electoral reasons. This is especially so in relation to underspending on the capital side.
In contrast, revenues continue to soar. By the end of the year, tax revenues are likely to be about €4 billion higher than in 2004 and up to €2 billion in excess of what was predicted when last year's Budget was framed. But a second, more striking, feature of the Exchequer returns concerns the imbalanced nature of revenue growth and its continued reliance on borrowing-related demand. In the year to November, overall tax revenues grew by close to 11 per cent. But customs duty revenue rose by 33 per cent, driven largely by car imports. Stamp duties and capital taxes increased by 28 and 27 per cent, respectively, fuelled largely by the housing market. And VAT receipts were up 13 per cent, reflecting strong consumer demand.
In projecting a more modest tax revenue growth of 6.7 per cent in 2006, the Government may be trying to avoid holding hostages to fortune. This figure is ahead of the 6.6 per cent presented in the Estimates for intended growth in total spending. However, Budget day social welfare measures and a public sector pay agreement will add to the rate of spending growth. While a prudent projection for revenue growth is justified, the picture is likely to be more positive when SSIA funds are spent and reincarnated in the form of tax revenues.
Although it does not account for all the Government's spending obligations next year, the financial position - as indicated in yesterday's White Paper - may yet be consistent with Micawber's definition of happiness. Even so, it is to be hoped that so important a component of the budgetary outlay as capital spending is not being unduly manipulated with the next general election in mind.