The Irish Times view on the latest exchequer figures: temptation for the Government

It is too early in the year to predict the likely outcome for the exchequer finances this year, or what this might mean for the budget in October. But some trends are clear after Friday’s exchequer figures for April. Spending continues to rise rapidly and is ahead of budget – it is difficult to see this coming back fully into line. Meanwhile, tax revenues are reasonably strong; income tax is running 7 per cent ahead of last year and the Department of Finance says that early weakness in corporation tax is due to “timing factors” relating to payments.

As of now, the likelihood is that the Government will meet or come close to achieving its public finance targets for 2024 and that it will face into framing the budget on the basis of having significant room for manoeuvre. One – welcome – constraint is the commitment to put cash aside into two funds saving for the future. Nonetheless, the early signs are that budget ministers Michael McGrath and Paschal Donohoe will come under pressure to loosen the reins in terms of tax cuts and spending measures, as a general election comes into view.

It is worth noting that a significant rise in spending is already planned into the figures for 2025. There will also be welfare changes to account for inflation. Meanwhile, it is also appropriate to adjust tax bands and credits to ensure that the proportion paid in tax does not go up as wages rise.

However, going beyond this would be a mistake, particularly in an economy which is operating at or near full capacity in many areas. Whatever the outcome on corporate tax this year, committing too much additional cash next year would also ignore the risks in this area, which have been well spelled out.

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In particular, there is no case to repeat the universal once-off measures – including the expensive energy credits – which have featured over the past couple of years. Poorer households may need to be protected, for sure, but this is better done via permanent changes to welfare programmes. Wholesale energy prices have come down sharply and, provided this holds, costs to consumers should continue to fall. They will not decline to the levels seen before the big spike in prices, but it is a mistake for the Government to try to cover the costs of increasing bills for all households on an ongoing basis.

Electoral considerations will lead to pressure for more budgetary largesse. Already Fine Gael and Fianna Fáil have been competing in making promises, some reasonable but some not. If the Coalition is to make the case that it can be relied upon to manage the public finances, then it cannot credibly do so if its tries to buy votes on budget day. Strong tax growth and relatively cautious management have kept the budget in surplus and left options for the future. This is a position that needs to be protected.