The Exchequer figures for the first quarter paint a familiar picture. Tax revenues are buoyant, Exchequer spending continues to rise strongly and the forecasts made at Budget time for the full year already look redundant. Barring an unforeseen downturn in the economy, the surplus of Government revenue over spending this year looks set to hit another record high.
The transformation of the Government's finances over the last decade is remarkable, reflecting in many ways the development of the economy. Strong income-tax growth is resulting from rapid growth in employment. Buoyant VAT and excise duties show that consumers remain confident and are spending more than they did last year, partly due to a rising population and partly to increased wealth.
The problems facing the economy in maintaining this performance have been well rehearsed. Many sectors are finding it difficult to get sufficient numbers of skilled employees. Such is the extent of this problem that, in a laudable initiative, a number of high-technology companies are co-operating with FAS to retrain long-term unemployed people and give them jobs. Elsewhere, the economy faces obvious problems of congestion and cost pressures which are bound to slow economic growth in the coming years.
But the latest Exchequer figures suggest that this inevitable slowdown is not yet happening. Apparently defying conditions elsewhere in the EU - and fuelled by lower interest rates - the economy here continues to expand rapidly.
The goal for the Government must be to try to tackle the problems now emerging and ensure, in so far as it can, that the economy can continue to grow strongly, if not quite as rapidly as it has over the past few years. This will require significant investment in infrastructure and a clearly thought out approach to economic planning in a number of areas.
Following the agreement of a new funding programme with the EU, many important issues will be dealt with in a new national development plan, which will lay out strategies for Exchequer-supported investment spending over the coming years. The strong finances will provide a good foundation upon which to build this programme as, with EU funding declining, the Government will have to pick up more of the cost for spending in areas such as roads and training.
The buoyant figures will also fuel other demands on the public purse. The teachers' unions yesterday indicated that they will seek pay increases for their members, joining the existing demands on the Exchequer. The high level of the Exchequer surplus will make it politically difficult for the Government to oppose such demands. The danger is that another knock-on round of public-pay increases will consume significant resources in the years ahead.
The national development plan and the negotiations on a new national agreement to replace Programme 2000 give an opportunity to draw up a strategic approach to both current and capital Government spending and to capitalise on the current strength of the Exchequer finances. The clear danger is that rather than taking this opportunity, the Government will concede to the groups that shout loudest and have the most political clout, leaving bills which the Exchequer will struggle to pay when the economy slows.