Extra €1bn in Exchequer surplus

FINANCE Minister Charlie McCreevy's successor will have an extra €1 billion to spend when he frames his first budget in the first week of December.

Yesterday's publication of the Exchequer Returns for the year to July show an Exchequer surplus of €255 million was recorded in the first seven months of the year, according to the figures from the Department of Finance.

This compares to an Exchequer Deficit of €241m the same time last year.

Irish Investment Bank chief economist Austin Hughes said the returns reflect a healthy economy.

Mr Hughes said the forecast Exchequer Borrowing Requirement at the beginning of the year of €2.8bn will not be required and will be closer to €1.3bn.

"This will give the new Finance Minister close to €1bn to play with," he said.

Total tax receipts for the seven months to the end of July came to €19.6bn, up from €17.4bn the same time last year.

The take from income tax increased by 24% to €5.6bn in the seven month period from €4.5bn the same time in 2003.

Stamp duty is up to €1.1bn from €937m in 2003.

Capital gains tax jumped 202% to €523m from €173m. Some of this increase is linked to accounting changes introduced in the budget.

Mr Hughes said the Government has indicated that as much as €840m of the extra revenue came as a result of tax payments related to illegal off-shore accounts.

Government spending increased by 8% to €17.5bn from €16.6bn in July 2003.

However, capital spending is down 11% and is 23% below its budgeted allocation for 2004. The State also contributed €711.4m to the EU in the year to July.

IBEC senior economist, Aebhric Mc Gibney, said that although capital spending can be 'lumpy' due to the size and scale of some projects, there seems to be a clear trend that capital spending in 2004 will be below target.

"This is bad news for businesses and consumers, tied up in traffic, waiting for the infrastructure deficit to be tackled. Current spending is appropriately in line with GNP growth in the economy. Revenue growth has been buoyant, indicating a gradual upturn, but also reflecting a number of 'once-off' factors, such as the revenue from offshore assets and bogus non-resident account investigations.

"The real worry is the weak capital spending. It is essential to ensure that infrastructure projects are carried out on time and on cost," he argued.