STRONG growth in tax revenues due to higher employment and rising consumer spending means the Government is set to meet its Budget borrowing targets for the year.

Exchequer figures for the first three months of 1996, issued yesterday, showed Government revenue and spending running close to Budget estimates, with income tax and VAT revenues particularly strong.

The figures showed the Government borrowed £561 million in the first quarter of this year, considerably higher than the £325 million in the same three months last year. However the Minister for Finance, Mr Quinn, said the increase was due to a series of once off factors, and said the underlying position was "satisfactory".

Last year, the Government benefited from money raised in the tax amnesty and the inflow of European Structural Funds which reduced its overall borrowing requirement in the first quarter.

There was strong growth of over 18 per cent in spending on supply services by Government departments in the first quarter. However, Mr Quinn said this reflected abnormally low spending in the early months of last year. The figures for this year showed no evidence of "significant slippage" in Government spending, he said.

Tax receipts amounted to £2.624 billion, up 5.7 per cent on the same quarter last year, running in line with Finance's expectations, officials said.

The total take from income tax rose by more than 6 per cent to £990 million, while VAT revenues were up 13 per cent at £779 million. Mr Michael Tutty, second secretary at the Department of Finance, said the strong income tax figures indicated rising employment in the economy. Sales in the retail sector remained relatively strong, he said, with VAT revenues coming in marginally above forecast.

Total expenditure over the three month period was £3.117 billion, close to 25 per cent of the Government's total spending estimates for the year.

While spending on supply services rose rapidly, central fund spending mainly debt servicing was up just 1.3 per cent, in line with expectations.

Overall, the current budget deficit the difference between day to day Exchequer revenue and spending came to £440 million. Borrowing to fund capital spending of £121 million during the quarter brought the total Exchequer Borrowing Requirement to £561 million. The target for the full year is £729 million, but normally the bulk of borrowing is undertaken in the first quarter.

The Exchequer funding position remains "comfortable", Mr Tutty said, with cash balances at the end of the first quarter of £1.7 billion.

Indicating Exchequer financing would perform broadly in line with forecasts in the current year, Mr Tutty said additional costs, such as EU fines relating to the beef industry, would be offset by savings in other areas.

Commenting on the figures last night, Mr Hans de Jong, economist at Goodbody stockbrokers, said, provided Government departments could hold spending on target, buoyant tax receipts should mean the Government could undershoot its Budget borrowing target. Goodbody said tax revenues would come in £150 million to £200 million ahead of target, meaning borrowing could be as low as £550 million.