More evidence of buoyant economic growth emerged yesterday as the Department of Finance unveiled the latest Exchequer figures. The dramatic increase in tax take points to double digit growth in the economy in the run-up to Christmas and to the first ever officially targeted surplus since the early 1970s.
Mr Michael Tutty, second secretary at the Department of Finance, admitted that the Exchequer will now run a "small surplus" in 1998, confirming what most analysts have been predicting for some time.
The end of December Exchequer returns showed that the State spent £235 million more than it took in during 1997. At the time of the Budget on December 3rd, the Minister for Finance, Mr McCreevy, had said the amount would be £278 million.
Dr Dan McLaughlin, chief economist at Riada Stockbrokers, pointed out that the bringing forward of liabilities underlined the fact that the Government can effectively choose what level of a borrowing requirement to run.
According to Dr McLaughlin there is now almost no doubt but that domestic spending is running in double digit figures. However, he warned, imports may be growing faster than exports and thus the actual rate of economic growth in 1997 may be slightly lower.
However, with tax revenues 14 per cent ahead of 1996 and the overall tax take exceeding the Budget target by more than £1 billion, or £116 million more than estimated on December 3rd, it is clear something quite remarkable is still happening to employment - and the revenue generated from it.
Of the extra tax receipts, £24 million came from income tax, pointing to continuing very rapid employment growth. Even corporation tax which traditionally falls off towards the end of the year, generated almost £15 million extra.
In a very surprising development VAT receipts were £54 million ahead of target. According to the Department of Finance this reflects buoyant retail sales in September and October. The pre-Christmas sales will not be reflected in VAT returns until the end of the first quarter.
However, the Department said the retail sales could not fully account for the dramatic rise. Mr Tutty suggested that there might yet be a drop in the VAT take this year as a result of the raising of the VAT threshold to £500,000.
The figures show that current spending exceeded the Budget target by £193 million. This was made up of £51 million for public sector pay costs and £32 million in Garda and prison officer overtime. Health costs exceeded the Estimates provision by £90 million of which £42 million was made up of Hepatitis C compensation costs.
While an additional £40 million went to agriculture, mostly to compensate farmers for green pound revaluations.
The Minister has also now fully discharged his outstanding liabilities to the An Post and Telecom pension funds. However, despite a £208 million extra payment to the Small Savings Reserve Fund, almost £1.5 billion is still outstanding.
