The Exchequer Returns for October show a continued modest improvement in the Government's finances. Much will now depend on tax returns in November - an important month for revenue due to the payment of self-assessment income taxes - but the indications are that the Budget target of borrowing for the year of €1.87 billion may be met, or at worst that the over-run will be limited.
This would be a welcome outcome in what has been a difficult year for the economy and would hold borrowing here at a level which would compare favourably with other EU countries.
The recovery in tax trends provides some good news for the Minister for Finance, Mr McCreevy, as he finalises his Budget package. Earlier in the year a significant tax shortfall had appeared to be in prospect and a continuation of this trend into next year would have made for a very difficult Budget. As it is, total tax revenues are now running almost 5 per cent ahead of last year.
It is important to keep this improving trend in context.Even allowing for some pick-up in the economy next year, finalising the Budget will still be a difficult exercise. The Government has no option but to keep spending growth at a modest level next year - and to realise that it will have to do so for the rest of its term, as the revenue buoyancy of the boom years will not return.
In such circumstances the Budget is about setting priorities and ensuring a sharper focus on value for money, both areas where this Government has not distinguished itself to date. A key priority - as highlighted in the recent mid-term review of the National Development Plan - must be maintaining capital investment spending on major investment projects. This year investment is undershooting its target and it would be a serious concern if this were to continue. Equally, areas such as health and education require substantial ongoing funding .
The only way the Government can hope to improve public service levels and deliver improved infrastructure at a time of tight resources is to achieve greater value for money. This was highlighted in the recent report on the NDP and it is what is driving the Government's reform programme in the health services.
Next week's spending estimates for 2004 and the Budget need to show a strategic approach to spending and taxation. However the task of ensuring a better return on State resources requires fundamental changes to structures and to the evaluation and management of expenditure. Achieving this will require clear direction from Government and poses significant challenges for ministers and the public service.