£400m surplus lifts Budget hopes

TOMORROW'S pre Budget figures will confirm there is scope for the most generous Budget in years.

The Minister for Finance will be looking at a substantial current budget surplus before he stands up to deliver his Budget next Wednesday. His key aim will be to maintain the economic boom, keep inflation down and, of course, convince voters to back the coalition.

Before the Budget, tomorrow's White Paper is likely to show that Mr Quinn has a current budget surplus of over £400 million. However he is likely to spend much of this on Budget day, with £290 million of tax reductions expected this year and some £140 million in additional spending, most of it on welfare.

But with some money raised from higher excise duties and other measures Mr Quinn should still be able to be the first Minister in recent years to announce in the Budget that he is aiming for a current surplus for the year.

Mr Quinn's main focus will be on personal taxation, with one percentage point cuts in the standard 27 per cent income tax rate and the 5.5 percent employees PRSI rate. Personal tax allowances will also be increased, and the standard tax band widened.

However, Mr Quinn will also be looking to bolster the business sector to try to maintain confidence and investment. The standard 38 per cent corporate tax rate is expected to be cut by two points, with a similar reduction expected in the 30 per cent rate which applies to the first £50,000 of profits. Employers PRSI relief is to be widened, while new tax incentives are to be announced for employee share ownership.

While Mr Quinn faces a strong position on the current budget, he will still have to borrow substantially to fund capital spending. He is still likely to have to pencil in a capital borrowing requirement of up to £800 million.

Tomorrow's pre Budget White Paper, which shows the financial position before the Budget is expected to show an Exchequer Borrowing Requirement, of between £300 and £425 million, according to market predictions. Further borrowing requirements will emerge on Budget day to leave the target for the year, somewhere between £600 million and £750 million. This is well within the Maastricht guidelines.

In the 1997 spending estimates the Minister said that gross current expenditure after the Budget would, be no higher than £13,014 million, However, that has already increased by £24 million to take account of the new public sector wage deal.

The Central Fund, which is mainly used for debt service, is projected to increase by 6 per cent in 1997.