Christmas cheer: €1.8bn surplus boost for Cowen

By Brian O'Mahony, Chief Business Correspondent

The government initially said it would have to borrow €2.8 billion this year to make ends meet. That figure had been revised down dramatically due to a healthier economy.

On Wednesday, new Finance Minister Brian Cowen said he would need to borrow just €200m.

Now it seems that will be unnecessary, due to the very strong tax take this year.

In fact, judging from the latest figures in November, Brian Cowen looks to be in line for a Christmas bonanza of his own.

Having played Santa to the nation's most needy in Wednesday's Budget, the latest figures on the government's tax take for 2004 look even healthier than was thought on Budget day.

The Department of Finance has urged caution, however.

December is always a high-spending month, involving double social welfare payments for Christmas and Government departments tending to spend their allocations by year end. On that basis, the €1.8bn surplus in November is deceptive.

But the figures do imply the Minister will have a surplus this year and will not be required to borrow a single cent, having been faced with a potential €3bn debt at the start of the year, the estimated cost of the nation's household Budget laid out by his predecessor Charlie McCreevy. As a result of this bonanza, the €3 billion debt facing the government in 2005 is already being called into doubt.

It could be €2.7 billion, or lower, said Jim Power, chief economist Friends First, depending on how December shapes up.

Higher tax returns across all categories have been the driving force, with the tax take overall running 11% higher than expected for the year, said Mr Power.

This is a huge turnaround for the government against the initial starting-out position, he said.

While it is difficult to forecast the final out-turn, it looks as if the Minister will have witnessed a near €3bn improvement in the national finances from the figures Charlie McCreevy set out with at the beginning of 2003.

If the economy performs like it did this year, the state's coffers could remain very healthy, paving the way for another generous Budget come next December, said Power.