It is a telling indicator of our robust economic good health when even the ultra-cautious Department of Finance mandarins are willing to concede that the Exchequer position is now "very comfortable". Less cautious souls might describe the Exchequer figures, released yesterday, as nothing less than sensational. This State is enjoying its best Exchequer performance in living memory at a time when job creation is at a record level - and when inflation remains well in check. Total revenues are some £1 billion ahead of forecasts as tax, VAT and other receipts surge during the current exceptional level of economic growth. The growth in tax revenue alone - up some 14 per cent - is more than twice what was estimated. The Department accepts that the economy may grow by 7 to 8 per cent this year. Private sector forecasters, however, believe that Gross National Product may be expanding by an unprecedented 10 per cent.
The Minister for Finance, Mr McCreevy, finds himself in a remarkably comfortable position; he may well be able to deliver some £500 million in tax cuts without breaching any of his fiscal targets. The Minister is right when he says that the taxpayer is entitled to some relief; the PAYE sector, in particular, is still shouldering an undue tax and PRSI burden without enjoying many of the health, social, cultural and sporting facilities that many other EU citizens take for granted. There is also much work to be done to bring our transport and educational infrastructure up to speed.
Mr McCreevy will, inevitably, come under intense pressure from his Cabinet colleagues for greater expenditure on these and other areas in the forthcoming discussions on the Estimates. Some loosening of the purse-strings to meet particular social needs is clearly warranted, but the Government must be wary of caving into each and every well-organised sectoral interest. To his credit, the Minister struck a measured tone in response to yesterday's figures and he continued to make the case for tight discipline in the management of the economy. And he has moved to lower public expectations about a giveaway Budget next month.
The British experience of a boom-and-bust cycle in the recent past should help to concentrate minds. Indeed the need for continued caution and prudence in the management of the Irish economy has been underlined by both the Economic and Social Research Institute and the International Monetary Fund in recent months. At the very least, the Government must be alive to the danger that the economy could overheat and it must also legislate for probable currency turbulence in the run-in to economic and monetary union.
But Mr McCreevy must also strike a balance. One of the secrets of our recent economic success is wage restraint across all sectors of industry. If this is to continue, then it is essential that the PAYE sector benefits from the Budget package.