Exchequer surplus running at £674m as tax receipts pour in

The Exchequer surplus was running at £674 million (A855 million) at the end of April as tax receipts continued to pour in and spending to pick up.

The economy is still growing so quickly that the tax cuts implemented in April only resulted in a very small slowdown in the rate of growth in income tax. The Exchequer has taken in £2.17 billion in income tax in the first four months of the year.

According to Mr Dermot O'Brien, chief economist at NCB Stockbrokers, the latest figures - for January to April - show no evidence whatsoever that the economy is slowing down.

Tax revenue is buoyant across most areas from capital taxes to VAT as well as income tax.

As spending rose, the surplus of revenue over expenditure - at £674 million surplus - was down from a record £1,009 billion recorded at the end of March but still significantly ahead of £111 million at the same time last year.

Tax revenues are up 14.7 per cent from 16.7 per cent at the end of March and a Budget day target of 8.6 per cent. "This is almost totally because of the impact of the first month of the Budget's tax cutting package," Mr O'Brien said. "But it is still very strong and there is no doubt that the economy is still in line for a £2 billion plus surplus at the end of the year."

At the time of the release of the official Exchequer returns for the first three months, the Minister for Finance, Mr McCreevy, revised his estimate for an overall surplus for the year to £2.1 billion from £1.6 billion on Budget day. This will be used to pay more off the national debt.

Strong house prices continued to feed into the lastest figures. Stamp duty revenues accelerated to 33.4 per cent from 27.7 per cent in March. Capital taxes were also up significantly.

In what may be a boost for the IBEC case for a reduction in VAT to push down inflation, receipts under this heading continued to rise substantially. VAT was 21.9 per cent ahead from 20.9 per cent in March and 15.1 per cent targeted at the Budget.

However, spending is beginning to kick in after very low expenditure during the first three months of the year.

Total spending is up 2.5 per cent with central fund spending, which is mostly made up of debt interest repayments, increasing dramatically. Most spending occurs at the end of the year and possible breaches of the pay guidelines laid down in the national agreement could have a very large impact later this year, Mr O'Brien noted.