Rising employment and buoyant consumer spending are boosting the Exchequer finances, which are now on target for a surplus well above £1 billion this year.
The strong figures look set to fuel demands for extra Government spending, with the teaching unions the latest group to indicate that they are seeking higher pay.
The Exchequer returns for the first three months of this year show that the Government took in £287 million more than it spent over that period as it continued to reap the benefits of strong economic growth.
This record first-quarter out-turn compares to an £82 million surplus in the first quarter of last year.
Tax revenue continues to surge. The total tax take over the three-month period rose by 13.3 per cent to £3.95 billion, well ahead of what was expected at Budget time. This indicates that the Budget surplus of revenue over spending for the full year looks set to comfortably exceed £1 billion, compared to a Budget forecast of £925 million.
Commenting on the figures yesterday, the Minister for Finance, Mr McCreevy, said they indicated that the public finances were well on target. However, he stressed that Government spending must be kept within target for 1999.
The bulk of the buoyancy in the first quarter came from an unexpectedly large increase in income tax receipts, which rose by over 11 per cent to £1.41 billion.
Mr Michael Tutty, second secretary at the Department of Finance, said the figures suggested that employment was rising more rapidly than expected.
The rapid growth in income tax receipts is expected to slow down in coming months as tax concessions introduced in the Budget begin to impact. However, Mr Tutty yesterday predicted that the year-end out-turn should still be better than expected.
Excise duties and VAT revenues were also ahead of forecasts, boosted by buoyant new car sales and increased consumer spending. The continuing increase in house prices has kept Government revenues from stamp duty ahead of expectations, rising 10 per cent in the first quarter to £160 million.
Corporation tax receipts fell from £175 million in the first quarter of last year to £160 million this year. However, according to the Department, this is primarily due to accounting changes at some major companies and will be made up for later in the year.
Current spending is rising more quickly than anticipated at Budget time but the Department says this is mainly due to once-off factors. Government spending on supply services increased by 15.8 per cent to £2.8 billion ahead of an estimated increase for the year of 10 per cent.
The strong spending rise was partly due to the timing of the European Social Fund and other EU receipts primarily for agriculture spending, with the overall result still broadly in line with expectations, according to the Department. Overall the difference between day-to-day revenue and spending gives a current Budget surplus of £337 million.