RUAIRI Quinn will become the first Minister for Finance for many years to target a current budget surplus, when he stands up to deliver the Budget next Wednesday.
In one of the most upbeat pre-Budget White Papers, the opening current budget surplus - before Budget measures - is £471 million, higher than most commentators had expected. Even after the Budget, Mr Quinn should be able to target a current surplus of some £200 million. Allowing for substantial capital borrowing, he is expected to aim for an overall exchequer borrowing figure of £600 million to £650 million, or about 1.5 to 1.6 per cent of GNP, well within the 3 per cent Maastricht guidline.
Unlike last year, the Government does not seem to be planning to raise any money from the sale of state assets. So there is no provision made for any sale of companies such as TSB, ACC and ICC banks.
There is also no provision to cover any capital given to semi-state companies, compared to a £100 million provision last year, much of it directed to Bord na Mona.
The key figure is the Department's estimate of what the exchequer needs to borrow before any Budget measures, which is £380 million. Before the Budget, the current surplus - is £471 million, while capital borrowing stands at £851 million.
However, Mr Quinn is likely to announce departmental balances of anything from £20 to £50 million next Wednesday, cutting the actual opening EBR closer to £350 million. These departmental balances are money left over at the end of the year which the various departments failed to spend.
In rough terms, Mr Quinn may thus have between £360 to £400 million on Budget day to increase spending and cut taxes. Some of this will be financed through an increase in excise duties, as well as continued tax buoyancy.
The spending increases and tax reductions in themselves feed back into the economy creating more revenue for the exchequer by boosting economic activity.
The final borrowing target is likely to be between £600 and £650 million, or around 1.5 per cent of Gross National Product.
The strength of the exchequer posit ion is due to expectations that strong growth will continue to generate tax buoyancy. The Department's calculations imply that it is forecasting nominal growth in the economy this year of 7 per cent of GNP or 5 per cent in real terms. It expects tax revenue to rise by about 7.7 per cent - before Budget cuts. However, this figure is inflated somewhat by a change in VAT collection procedure and the underlying rise is just below 7 per cent. The Department is estimating that £13.485 billion of tax revenue will be raised in 1997, somewhat less than many analysts have been predicting.
The main spending on Budget day will be around £11 5 million on social welfare increases, including rises in child benefit. A 1 percentage point cut in the standard tax rate will cost £56 million this year with a cut in the employee PSRI rate costing a similar amount. Rises in personal allowances of £250 for a single person to £2,900 and a £500 rise in the married couple's allowance would cost £73 million. A widening of the standard rate income band so that less tax will be paid at 48 per cent could cost around £30 million.
Other measures could include an increase in exemption limits or miscellaneous spending, which could come to £30 million.
The net costs of main tax measures anticipated is likely to come to around £240 million.
On the spending side, the main difference between the most recent figures and those published in the estimates last month is the inclusion of £24 million as the cost of the draft public service pay agreement.
