Just how much additional money is the Minister for Finance, Mr McCreevy, actually going to have at his disposal by the December budget? So far he can count on £3.3 billion from the Telecom flotation and another £300 million from the sale of ICC, and he can possibly add to that another £400 million early next year if KPN decides to increase its stake in Telecom.
As a result, there is about £4 billion extra in the kitty this year and that is before the largest-ever surplus on day-to-day spending is taken into account. The surplus has been estimated at £1.7 billion but, according to Dr Dan McLaughlin, chief economist at ABN Amro, it is likely to be about £2 billion.
Already some of the spending has been earmarked by the Minister but much remains to play for. He has indicated that about £1.2 billion will be used to pay off the Telecom and An Post pension liabilities.
On top of that, about £600 million will be used to set up a new pension fund for the public sector - about 1 per cent gross of Gross National Product. This is to be used to start a fund to offset the liabilities of the public sector into the future. However, Mr McCreevy is also likely to use most of the surplus Telecom cash to boost the fund in its first year. He has said that it will contain between £4 billion and £5 billion within two years.
He will take some additional money for once-off priority improvements in infrastructure. It is unclear how much this will be but there is a limit to how much can be spent on large projects in one year, given planning and other delays. It could be that the amount pencilled in here is about £400 million.
That leaves almost £4 billion, and the bulk of this will be used to pay off part of the national debt and for the pensions fund.
According to Dr McLaughlin, "we are in a virtuous circle unlike the vicious circle of the 1980s when spending was considerably higher than revenue and the larger debt attracted more interest repayments".
As a result, if revenues continue to grow by 6 per cent or 8 per cent and spending is kept broadly at 4 per cent, the Minister will be able to fund significant tax cuts without much bother. significant further privatisation receipts are further down the road with other companies such as Aer Lingus, Coillte and Aer Rianta heading towards flotation in the longer term, and TSB and ACC set to do likewise next year.
Despite talk that the money should be spent or invested rather than pay off the debt, Mr McCreevy is adamant that he will not make the same mistake as predecessors did when the economy last did well in the 1970s. He points out he is the longest-serving advocate in the Dail of reducing debt and is not about to change.
Apart from the new pensions fund, he will also be putting money into the National Development Plan. Under its proposed terms, the Government is to spend £33.4 billion over the next seven years. This will go towards developing roads and railways, human resources, housing and sewerage services.
The last Budget provided for £2.3 billion in expenditure on the public capital programme which came to £4 billion when EU funding was included. The same sort of
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