Exchequer figures - Cowen looks set to delay his largesse

IRELAND’S economic performance could hardly be rosier, judging by yesterday’s buoyant Exchequer figures showing the Government coffers are €2.5 billion better off than even the most optimistic forecast.

Reaffirming Finance Minister Brian Cowen’s up-beat Estimates, which effectively gave an overview of the past year and the year ahead, revenues are pouring in.

With VAT, stamp duty and income tax the main performers, Mr Cowen will have more than ample room for manoeuvre when he delivers the 2006 budget next week.

Respectively, VAT receipts and stamp duties on new homes are running at over €504 million and €502m ahead of forecasts.

And with tax receipts more than €1.7bn ahead of predictions and spending running €1.4bn behind target, the minister has oodles of money to splash out on contentious issues like childcare as well as giving a more generous support package to the elderly.

Further illustrating the robust condition of the economy, the projected general deficit of €1.2bn for the coming year is well within EU rules.

Following Fianna Fáil’s drubbing at last year’s local polls, Mr Cowen knows how important it is to defuse the childcare time bomb that could blow the Coalition out of the water in the 2007 General Election.

Ironically, the childcare crisis was born of Government policies aimed at convincing couples to go out to work.

Despite its success, however, the administration has singularly failed to help families meet the soaring childcare costs.

Many Irish couples are now spending more on child minders than on their house mortgage.

Lagging behind other European countries, Ireland still offers no tax relief to ease this burden.

While Mr Cowen argues that “no one can wave a magic wand” to sort out the childcare problem, hard-pressed parents expect him to make a positive start with a realistic tax package next Wednesday.

In the Estimates, the minister unveiled a 7% increase in spending, up 1% on last year, bringing the amount allocated for 2006 to €48.5bn.

In line with the Coalition’s new-found brand of socialism, this figure will rise when social welfare and other increases are added on Budget Day.

As we already know, the main Budget beneficiaries will be Health (€12bn), Education (€7.2bn) and Social Welfare (€12.4bn).

Ten times more cautious than Charlie McCreevy, his predecessor at finance, Mr Cowen is unlikely to pull any surprises from the Budget hat next week.

Essentially, the size of the Budget hinges on economic performance.

The Exchequer may be awash with money, but with a growth of 5% forecast next year, a cynical Government, its eye on the polls, can be expected to reserve the real give-away bonanza until next Christmas.

In next Wednesday’s Budget, Mr Cowen will unwrap the first part of the Coalition’s childcare package.

Besides kick-starting the social partnership process, this will set the Coalition on course for a Spring election in 2007 when it will offer even more largesse to voters flush with cash from SSIA saving schemes already warming their pockets.