Booming tax revenues revealed in the latest Exchequer figures show that the economy is continuing to grow strongly and have led the Minister for Finance, Mr McCreevy, to state that this year's Budget figures may be too conservative.
The Exchequer returns, published yesterday, show that the Government took in some £747 million more than it spent in 1998 - the largest such surplus on record.
The main reason for the strong figures is that the growth in tax revenues continues to confound Government forecasters, running well ahead of target last year. The Exchequer took in some £962 million more than it had estimated in taxes in 1998, out of a total tax take of some £16.13 billion. Rapidly rising employment and booming retail sales were the two main factors in the buoyancy.
Because of the strong trend in taxes, Mr McCreevy is already increasing his forecast for this year's Exchequer surplus from the £925 million targeted on Budget day. "The somewhat higher than expected tax receipts in late November and December could continue in 1999 and could result in a slightly higher surplus than projected on Budget day," he said.
Dr Dan McLaughlin, chief economist at ABN Amro, pointed out that this was the fifth successive year in which the Exchequer had beaten the original Budget day target, although in this case the difference was an "extraordinary £835 million", given that the Minister had originally budgeted to borrow £89 million last year. The Budget targets would also be beaten this year, Mr McLaughlin said, predicting another record surplus of some £1.5 billion. Others are more cautious, however, with forecasters at NCB stockbrokers estimating about £1 billion as the likely 1999 surplus.
According to Mr Colin Hunt, chief economist at Goodbody stockbrokers, it is prudent of the Minister to underestimate the size of the bounty given the embarrassment of riches at his disposal. "Expectations would be raised even further if the amounts were not underestimated," he noted.
While the 1998 surplus was well ahead of the targets set in the Budget, it was roughly in line with an estimate made by the Department early last month, following comments by Dr Michael Somers, the chief executive of the National Treasury Management Agency.
Dr Somers had said that huge expenditure would be required in December to bring the figures closer to the Department's forecast. In the event, heavy spending during the month did sharply reduce the end-of-year surplus.
Overall last year, the extent of tax revenue growth took Government forecasters by surprise. Income taxes, VAT and corporation tax were all ahead of target, while there was also strong growth in stamp duty and capital taxes.
Day-to-day Government spending came in slightly below target, with some £56 million less spent than had been budgeted for, despite overruns in Justice, Education and Health. These were offset by higher PRSI receipts and by savings on social welfare payments as the numbers on the live register continued to fall.
The Minister, in a statement, re-emphasised his commitment to controlling public expenditure and putting all the surplus towards reducing the national debt, which fell by £1 billion in 1998.
However, the Fine Gael spokesman on finance, Mr Michael Noonan, said that the Minister should also be judged on the quality of his spending. "It is very difficult to explain to the public why hospital wards have to be closed down and why temporary nursing staff have to be made redundant at the end of a year which saw the greatest Exchequer surplus since the foundation of the State."