In the annual battle over spending plans, the Minister for Finance has managed to keep a reasonably tight rein on his Ministerial colleagues' spending ambitions. He will now have an embarrassment of riches when framing the 2000 Budget, which will be delivered on December 1st.
According to the Minister, the Budget surplus for next year is likely to be the largest on record. Such is the strength of the Exchequer position that he can plan significant tax reductions, while still aiming for a big surplus.
Spending is still rising well ahead of inflation. Day-to-day spending on running Government Departments is set to rise by 6.8 per cent next year and Budget social welfare increases will add to this.
Significantly, the Estimates do not include any money for the pay rises in the public service next year, which will add a substantial amount to the total.
The 6.8 per cent rise pencilled in for 2000 contrasts with a rise of some 9 per cent in 1999. However, according to the Minister's own measure, the rate of spending increase is slower still.
Taking into account falling debt repayments - benefiting from low international interest rates - the Minister has met his target of keeping the overall rise in current spending to the 4 per cent target.
Falling interest rates and savings from the National Treasury Management Agency allow total current spending growth to fall to 2.8 per cent in 2000 from 7.1 per cent in 1999 and 2.5 per cent in 1998. The annual average is thus 4.07 per cent, just at the Minister's own target of 4 per cent. Of course, almost since he took office, Mr McCreevy has sharply increased spending on capital investment, which goes towards infrastructure projects. The Estimates provide for an increase of 25 per cent in voted capital spending in 2000. This is in the context of the National Development Plan, which will allow for spending of £40 billion over seven years to 2006.
If these targets are to be achieved then further sharp increases will be needed in subsequent years. Investment spending has increased sharply in recent years and delays in starting projects and obtaining planning permission will give headaches to policy-makers for the next couple of years.
Public pay remains a problem. Day-to-day spending is estimated to increase by £825 mill ion in 2000 to £12.96 billion, or 6.8 per cent. Over half of this increase - or £527 million -
is to cover additional pay and pension costs next year. However, the Minister stressed this does not provide any estimate for any pay increases agreed in the negotiations for the successor to Partnership 2000 - or for any increases if no deal is reached.
The £527 million pay increase already pencilled in for next year reflects several factors. Pay-rate increases are adding £21 6 million to the bill, the cost of expanded services adds £207 million and other technical factors £104 million.
According to the Minister, the £216 million for pay-rate increases largely reflects the Partnership 2000 increase, including the nurses as well as a provision for the award to the Garda.
Since the end of 1996, gross current spending has risen some 37 per cent and the main reason has been the jump in public sector pay, which has risen by 38 per cent in that period.
The Government will be trying to keep a cap on that figure during the negotiations for Partnership 2000's successor.
According to Mr Oliver Mangan, bond economist at AIB, the Minister still has room to run a surplus of revenue over spending of some £2 billion this year. This will allow significant repayment on the national debt this year.
On top of that, he is likely to put the bulk of the £3 billion proceeds of the Telecom Eireann flotation into a fund to pay for future pension provision.
These strong trends will continue into next year, allowing room for significant tax cuts. The Minister has already indicated that both the top and standard rate tax rates will be cut. There will be some widening of the standard rate tax band to ensure fewer people pay at the top rate and an increase in allowances to take more out of the tax net. He has also indicated there will be measures to tackle childcare and a large increase in child benefit looks likely - and he will probably still be able to aim for a surplus of over £2 billion again this year.