The Irish Times view on the exchequer returns: the temptation of a pre-election giveaway needs to be resisted

Another year and another surge in corporation tax. The mid-year exchequer figures, show that taxes are running more than 9 per cent up in the first six months of the year, leaving the exchequer finances in a healthy position.

Corporation tax is again the big contributor, with receipts in June of €9.6 billion, more than 38 per cent ahead of the same time last year. For the first six months as a whole, corporation tax is up by 15 per cent. Reflecting the strong jobs market, the income tax take of €16.5 billion in the first six months of the year is up 7.5 per cent.

The strong figures leave the Government well-placed as it plans the budget for next year. Its main problem is building expectations of generosity in tax cuts and spending increases. As well as from outside Government these will, of course, also come from within its own ranks. Keeping control of this will be a key issue for the new Minister for Finance, Jack Chambers and the Minister for Public Expenditure, Paschal Donohoe.

The Department of Finance will plead that the corporate tax receipts are inherently volatile. But backbenchers and some spending ministers will point out that despite repeated warnings over recent years, the take just keeps climbing higher. Both viewpoints have some justification, but it remains vital that potentially transitory receipts are not used to prop up day-to-day spending.

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As ever, it will be a question of trying to find the right balance – and also recognising significant international uncertainties. Government spending is already increasing strongly, running 12 per cent ahead of last year. This follows on from strong increases over recent years, including a major and necessary scaling up of State investment plans. The current strong exchequer finances give the opportunity of underpinning the necessary investments in areas like housing, water, energy, hospitals and schools. But they also create the risk of a giveaway pre-election package.

A long summer of negotiation lies ahead. However, key decisions will be made as early as next week, when the Government publishes its Summer Economic Statement, which will set the broad budgetary parameters. Already agreement has been reached on putting aside some ¤6 billion next year into two new funds to support future spending, But even after this, the temptation will still be there to go well beyond the rule that spending should only rise 5 per cent per annum.

It will be a difficult budget given the political pressures from the electorate and the Opposition. Opportunities are there, for sure, but the challenge is to create a sustainable multi-year plan to address the key issues, and not to pretend that some kind of pre-election giveaway to voters is part of the answer. The old parental adage when giving money to children – “don’t spend it all at once” – comes to mind.