The Government now has substantial room for manoeuvre as it frames next month's Budget. Buoyant revenues from all forms of taxation, as well as the decline in the cost of servicing the national debt, means it has scope for substantial tax giveaways.
The Minister for Finance, Mr McCreevy, can afford to cut both the higher and lower rates of income tax, as well as widen the standard rate band and increase personal allowances, in an effort to iron out remaining anomalies in the system.
Precisely what he will do on Budget day will be thrashed out between the Government parties over the next couple of weeks.
As has become common in recent years, the Minister used the strong state of the Exchequer finances to ease his position next year. He did this by paying bills in 1997 which would normally have fallen due in 1998.
Over £400 million of spending was brought forward to this year. The Minister argues this is prudent, using the strong state of the Exchequer finances, but it also lowers the increase in 1998 spending when compared to 1997.
After all the changes, expenditure of providing government services this year is estimated at £10.385 billion, compared to a 1998 estimate of £10.811 billion before the Budget is announced.
This is an increase of 4.1 per cent.
But in framing its programme target of holding spending growth below 4 per cent, the Government also included central fund spending, which is mainly composed of payments on the national debt.
Payments in this area will fall in 1998, as lower interest rates will cut the cost of debt-servicing. This means that the overall increase in current spending - counting the central fund together with spending on services - will show a rise of just 1.8 per cent.
As a result, the Government will keep well within its own 4 per cent limit, even when extra spending is added to the Estimates total on Budget day. However, for future years this target may be harder to achieve, as there will not be the same scope to bring spending forward and a continued fall in debt-servicing costs is not guaranteed.
The figures leave room for at least £400 million in extra spending on Budget day. This will partly be used up for extra spending on social welfare. The Minister stressed that he has "no intention" of using up all the money and it would be a surprise if he added more than £150 million to spending on Budget day.
But the figures do leave the Government with room to settle some outstanding public sector pay claims before the two by-elections.
It is clear that there are continuing problems regarding public sector pay. Exchequer pay and pensions will account for almost £300 million of the total £426 million increase in total spending. Overall, the pay bill will cost £5.6 billion next year, a 5.6 per cent increase. Last year the rise was 10.5 per cent while a year earlier the rise was 5.3 per cent.
The Estimates make no provision for certain public sector pay claims now under negotiation, including the craftworkers, the gardai and the defence forces.
Already the pay bill is £126 million higher than expected, mainly because of Garda and prison officer overtime which will cost an extra £31 million and an increase of £27 million in the cost of local bargaining settlements for paramedics, prison officers and clerical grades in the civil service.
The Minister admitted there are "pressures" in these areas but he insisted the Government cannot go on increasing public sector pay at 10 per cent a year. "The terms of the national agreements must be adhered to," he said.
"The agreement was freely entered into and the parameters have to be met and complied with."
He added that the rate of pay increase seen in recent years cannot be kept up. If it does, something has to give, he said.
On the other hand, the 17.5 per cent increase in spending on the capital side, particularly in the productive areas of education and roads, is a clear sign he is keen to put away some of the fruits of economic growth. As Mr McCreevy said, we have to do some catching up in these areas.
This increase includes the £100 million for the high-tech education fund announced last week, as well as significant increases in a range of other areas.
There was no hint yesterday of whether Mr McCreevy plans to run a surplus in the Exchequer finances for 1998 when he delivers the Budget. However, it would be very difficult for him to continue adding to the national debt in times of such prosperity, particularly as the State prepares to enter monetary union, where budgetary policy will be within strict guidelines.
Mr McCreevy has said he is aware that he must be prudent. "What goes up must come down," he said, referring to the buoyant economy.
"It is prudent to make provision and after monetary union we will not have the same latitude to run deficits as we did in the past."
This is perhaps an indication that Mr McCreevy will budget for a small surplus in the Exchequer finances next year, or at most a very low level of overall borrowing.
Given the strong states of the finances, he can do this, while also announcing a generous package for welfare recipients on Budget day and implementing enough in tax reductions to give everyone a few extra pounds in their pockets.