The Minister for Finance finds himself in a better than expected position, once again, as he faces into the Estimates campaign and ultimately the Budget in December. These figures emerge as the election campaign is being planned.
The Exchequer returns for the first three quarters of the year, published yesterday, follow a familiar pattern. As was the case this time last year, tax revenues are running ahead of forecast while Government spending lags behind target.
The net effect is a smaller than predicted deficit in the Exchequer finances. As of the end of last month the Exchequer deficit stands at €1,123 million, indicating the Government is on track to comfortably undershoot its budget day target of a €2,988 million deficit for the year as whole.
A significant factor is this scenario is tax revenues which are currently €1 billion ahead of forecast, with significant excesses reported for VAT and stamp duty. Income tax is also well ahead of predicted levels, but much of this is down to once-off gains as a result of the Revenue Commissioners special investigations.
Government spending is up, but not by as much as predicted, with a shortfall of some €916 million between what was promised on budget day and what will be delivered. It seems familiar, but there is one key difference. This time last year the economic picture was one of steady improvement. Now, the backdrop is less reassuring.
As last week's national accounts showed, the economy is not growing as strongly as predicted and arguably not in the fashion that is most desirable. The six-month figures published last week show that the Government's prediction of 5.1 per cent economic growth this year looks optimistic.
The national accounts also underlined the extent to which growth is dependent on personal consumption and construction rather than trade. This was confirmed yesterday by both the strong growth in consumption taxes, such as VAT and stamp duty, and also disappointing corporation tax receipts.
Added together with the inevitability of slowdown in construction output and Monday's indicator that consumer confidence has fallen to its lowest level in almost two years, there is genuine cause for concern about the sustainability of the current trends.
Minister for Finance Brian Cowen will undoubtedly highlight this in his discussion with Cabinet colleagues in the coming weeks over their 2006 allocations. They in turn will argue that with a election in the offing, it is time to be generous. The risks to growth are real.