The Exchequer surplus stood at some £5.82 billion (€7.4 billion) at the end of July, by far and away the highest in the State's history, according to official returns from the Department of Finance.
The figures show the economy continuing to grow very strongly and, while the surplus included some £3.6 billion from the Telecom privatisation, even a £2.2 billion surplus will be very difficult for the State to spend before the end of the year.
According to the figures published yesterday, tax revenue is still growing strongly.
Overall tax revenue was 16 per cent higher than last year, pointing to continued strong growth in the economy. This will allow the Government considerable room for manoeuvre in deciding on the new National Development Plan, as well as considerable room for tax cuts and social welfare increases in the December Budget.
The Government is still predicting that the overall surplus will be some £1.7 billion at the end of the year. According to Mr Colin Hunt, chief economist at Goodbody Stockbrokers, however, there will have to be extraordinary spending for the Government to hit its target.
"We will see a speed up in spending towards the end of the year but the surplus is more likely to be about £1.9 billion," he said.
Even without privatisation receipts, the surplus is running at some 3.4 per cent of GNP, even larger than the normally accepted maximum of 3 per cent.
"The Minister is in an extremely fortunate position and, with this abundance of resources, can now start really plugging the infrastructure gap."
A large portion of the surplus will be put into the new pension fund announced recently by the Minister for Finance, Mr McCreevy. Capital spending can be as high as £1.4 billion while maintaining the surplus and it will be difficult to spend more than that in 1999, given planning timetables.
To meet the Government's revised targets, tax receipts will have to slow down to 12 per cent. But the latest figures show tax revenue rising across the board and corporation tax, in particular, was very strong at some 31 per cent higher than in the same period last year. This growth rate also underlines the health of corporate Ireland as well as corporate America, Mr Hunt said. But it will be difficult to see it replicated next year given the slowdown in external markets and the traded sector generally.
There was also strong growth in excise duties and VAT, while income tax was also rising strongly at almost 10 per cent. The big driver in the economy continues to be consumer and domestic demand. Day-to-day Government spending is also increasing faster than targets - at 12.8 per cent, a further acceleration from June.
According to Mr Hunt, current spending should not be growing faster than the overall rate of economic activity. In addition, the buoyant labour market and falling unemployment payments should point to some deceleration.
"This will have to be watched over the coming months. It is very easy when the Government is enjoying fortuitous economic circumstances to allow spending to creep higher. But the needs of the economy would be best served by more restraint."
